China’s expansion a risk for Western mining interests in Africa

China’s rapid expansion in the African continent brings both risk and peril to Western mining companies operating in the region.

According to a report released this week by Pierre Fournier and Michael Fini of National Bank Financial the freight-train pace of Chinese investment in Africa threatens to displace Western mining companies, especially given the emerging superpower’s lack of scruples when dealing with corrupt or repressive governments and the financial backing enjoyed by China’s leading state-owned enterprises.

Fournier and Fini write that Chinese investment is ‘typically welcomed by corrupt and less-corrupt governments alike as they come with no-strings-attached, a result of Beijing’s preferred foreign policy of “non-interference.”‘

China maintains an official stance of non-inteference in the domestic affairs of other nation-states, largely due to the government’s concerns over separatist movements in Xinjiang and Tibet.

A further problem for Western miners is the immense financial support enjoyed by China’s state-owned companies, who enjoy the direct backing of the central government and its coffers laden with foreign exchange reaped from the country’s giant export industry. Acording to Fournier and Fini Western miners ‘will be hard-pressed to successfully compete with politically connected and capital-flush Chinese firms.’

Western miners finally face the more sinister prospect of the expropriation and sale of their projects in countries under corrupt regimes whose rulers favour Chinese interests, with a recent, salient example being the confiscation of two permits from Toronto-listed Katanga Mining Ltd. by the Democratic Republic of Congo in 2007, and their subsequent delivery to Sicomines Co., Ltd., a joint-venture partly owned by China Enterprise Group.

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