Portrait of Huang Nubo, Iceland’s Chinese conqueror

November 17, 2011

Southern Weekend has published a profile of Huang Nubo, the real estate magnate whose bid to buy a large chunk of land in Iceland to build a mega-resort has raised predictable waves and conspiracy theories about China’s government involvement (Huang has been a Propaganda Department official). The profile, translated on China Dialogue, makes for fascinating reading.

The man, it turns out, is a serious mountaineer and one of the few people who have been to both the South and the North Pole. He is almost 2m tall. His 16th-floor office has four cats, a rabbit, two monkeys and two parrots: “not the traditional office of a Chinese businessman.”

Maybe it’s just the Nordic connection, but the picture reminded me of Henning Mankell’s description of the Peking office of the evil tycoon who is the protagonist of his novel The Man from Beijing. That tycoon, connected to the highest officials in the Party, plans a mass resettlement of Chinese farmers in Africa even as he arranges for a series of revenge murders in Sweden. The Guardian called the novel “admirable in its concern about corruption, colonialism and ­cruelty.” The two businessmen are very similar: starting from officialdom, they become cosmopolitan globetrotters — Huang actually says he decided to quit government service after reading Chekhov’s Death of an Official! — but it is just this seeming cosmopolitanism that makes them such good subjects of conspiracy theories.

The Iceland venture was facilitated by the wife of an Icelandic friend Huang had met at Peking University. She later became mayor of Reykjavik and a government minister. (This detail reminded me of Dan Holloway’s short story in which a Spanish official decides the only way to save his hometown is to invite Chinese investors to build a car factory that will destroy the local landscape. The head of the Chinese delegation is a businesswoman who was Ignacio’s lover during his studies in China.)

According to the article, in 2005, Huang tried to invest in tourism development at Issyk-Kol Lake in Kyrgyzstan but withdrew after media spread the story that the project was a cover for China’s nuclear submarine programme and Kyrgyz officials began asking him for their cut. (I visited Issyk-Kol around the same time and wished there were somewhere to stay apart from Soviet-ere sanatoria.) “I got scared — you can’t go so far as to bribe people.” Then Huang tried to invest in a resort in Hokkaido but found that Japanese workers didn’t want to work for a Chinese boss or a woman.

See, he says all the right things for liberal Western readers. Suspicious, huh?

To the three c’s of corruption, colonialism and cruelty, let’s add two more: cosmopolitanism and conspiracy. All combinations allowed.

More support for Chinese agricultural investment abroad as manufacturing investment matures

May 15, 2011

Last year, I speculated about signals from the Chinese government that it might be shifting its focus towards supporting investment in manufacturing and agriculture overseas, and away from mining and oil. With the new “Notice on gooddoing the work of funding applications for the Foreign Economic and Technical Cooperation Programme in 2011” 《关于做好2011年对外经济技术合作专项资金申报工作的通知》, jointly issued by the ministries of finance and economy, greater support for agricultural investment is now official, but not at the expense of mining. As a recent article on a Chinese finance news website reports, the Notice singles out agriculture, forestry, fisheries, and mining as key areas of support. Such investments can now apply for a government subsidy of 30 million yuan.

Formerly, subsidies were smaller and were granted mostly to manufacturing investments. But manufacturing investment has now taken off, and according to one report, it now accounts for 22% of Chinese investment in Africa, as against 29% in mining, leading The Economist to state that “the Chinese … have always wanted to do more than dig up fuel when investing abroad.” The received wisdom of China being interested only in resources may be changing. (Here are Deborah Brautigam’s comments on The Economist article.) An article in the Chinese edition of Global Times profiles the 26-year-old general manager of the Ethiopian branch of Lifan 力帆, a car manufacturer that opened an assembly plant there in 2010. In that year, it achieved a market share of 25%, second only Toyota in car sales. Another Chinese entrepreneur in Ethiopia runs a leather processing factory with 20 Chinese and 300 local workers. The article also cites a Zambian government figure that states that Chinese companies created 15 thousand jobs for Zambians in 2010.

The finance article opines that this new support policy will be a turning point in China’s overseas agricultural investment, as Chinese agribusiness is generally relatively undercapitalized. But perhaps more important is the official support that has now been made clear. In 2008, the Ministry of Agriculture proposed a plan to support land acquisition abroad, and even earlier a senior policy bank official proposed to send Chinese farmers to Africa, but the government denied such plans after they generated negative publicity abroad. Until now, China has been a minor player in land acquitions compared to the Gulf states and South Korea, and only 0.8% of its 2009 FDI was in agriculture. It is likely that the strength of the denials in 2008 and the cautiousness of Chinese land acquisitions reflects conflicting views and interests within China’s bureaucracy: the foreign ministry is likely to be wary of the unpopularity of “land grabs.” (Or there might even, as in Henning Mankell’s thriller The Man from Beijing, be a struggle within the Party between left-wingers opposed to anything resembling neocolonialism and others linked to corporate interest…)

The article does not mention the denials, but notes that land acquisitions are likely to meet with opposition, not least from the multinationals that now control much agricultural production, particularly in South America, through contract farming. It notes that the activities by a Chongqing company, 重庆粮食集团, which has been at the forefront of agricultural investment in Brazil and Laos, have triggered the drafting of a law banning foreign land acquisitions in Brazil (the law has not yet been tabled). To mitigate such opposition, Chinese consultants interviewed in the article recommend co-management with host governments, couple agicultural investments with manufacturing, improve the assessment of political risks (the loss of Chinese projects due to the fighting in Libya has apparently caught investors unprepared), and finally to increase China’s military strength.

Protecting Chinese investments abroad is the subject of an article by Miao Yingchun 苗迎春, an international relations scholar at Wuhan University, which has been published in 红旗文稿 (Red Flag Essays), a “theory” forum of the Chinese Communist Party. Miao believes that China is still far from being the kind of global capital exporter that the U.S. is, and makes seven proposals, including accelerating investment by China’s sovereign wealth fund; spreading more investment to Africa and the developed world; leveraging foreign aid in promoting investment; strengthening the assessment of political risk; and strengthening anti-piracy activity.

The most interesting is his proposal to increase aid: he writes that at the moment China’s foreign assistance is only 1/3 of the OECD average, about the same as Switzerland’s. Since aid, he says, is an important driver of investment, trade, and construction contracting, it should be increased.

Miao reports that “the Chinese side” owns assets of $1 trillion abroad, including $230 billion in FDI, $240 billion in shares, and the rest in “other forms.” According to the Global Times article, there were 2000 companies in Africa owned by Chinese firms, with a total investment of $32.3 billion.

Yet another article, in First Financial Daily 第一财经日报,lists several large recent agricultural investments abroad. Fudi Agricultural Ltd. 福地农业优先公司has invested 200 million yuan in 17 thousand ha of land in Brazil to plant soybeans; Julong Group 聚龙集团 of Tianjin spent $200 million on a 20 thousand ha palm oil plantation in Southeast Asia; and Chongqing’s Chongliang group, mentioned above, has announced a 2.5 billion yuan investment in a Brazilian soybean plantation. This is the largest Chinese agricultural investment abroad so far, and the article notes that it is seen as a very large project for a local state-owned enterprise. About 2/3 of the capital, $234 million, has been loaned by China Development Bank; if the profit of the company remained as it was in 2009, then it would take 20 years to repay this loan. A further $102 billion has been pledged by a Chongqing investment company. Chongliang is planning further investments in Canada and Australia (rapeseed oil), Cambodia (rice), and Malaysia (palm oil), totalling $3.4 billion.

A commentator interviewed by the newspaper said that Chongliang’s investments reflect the Chinese authorities’ desire to circumvent the Chicago commodities exchange and secure direct grain and oil supply.