Hong Kong is the financial and operational base of Chinese investment in Africa
In 2016, US$ 62 billion in foreign investment went through Hong Kong, 59 billion to Africa. About 90 per cent of the 10,000 Chinese companies operating in Africa are privately owned. The former British colony does as well as the British Virgin Islands and the Cayman Islands and is used by the Chinese government for investments in Africa. China could amass combined revenues of US$ 440 billion by 2025. At present, it is already Africa’s top economic partner. Non-compliance with labour regulations remains.
Hong Kong (AsiaNews/Agencies) – About 60 per cent of China's foreign direct investment (FDI) goes through via Hong Kong and most are estimated to go to Africa.
On 1st July, Hong Kong celebrated the 20th anniversary of its handover to China. The former British Crown colony has always been a point of reference for those who want to do business with China since FDI require a special financial structure.
For many investors, Hong Kong is still "China's financial capital", eighth worldwide in terms of foreign investment, third in Asia after Beijing and Tokyo. In 2016, it invested US$ 62 billion dollars in foreign investment, 59 billion in Africa.
An investigation by French newspaper Le Monde noted that Hong Kong is used by Chinese investments in dollars and raises funds to underwrite large infrastructure projects in Africa. Hong Kong does as well as other offshore centres like the British Virgin Islands and the Cayman Islands.
The Chinese government also uses Hong Kong to speed up transactions. This is why most of China's direct investment in Africa that gets the green light from the Trade Ministry go through Hong Kong first.
According to a study by McKinsey & Company, financial flows from China to Africa are at least 15 per cent higher than official figures.
Chinese companies could amass combined revenues of US$ 440 billion in 2025, more than double the US$ 180 billion they generated in 2015, the management consulting firm reports.
McKinsey researchers found that about 90 per cent of the 10,000 or so Chinese businesses in Africa are privately owned. They operate in various fields with almost a third in manufacturing, a quarter in the services sector, and one fifth in trade, construction and real estate.
In infrastructure, Chinese companies claim about half of the construction market in Africa. Nearly a quarter said they had covered their initial investment in one year or less, and a third reported profit margins of over 20 per cent.
Hong Kong has also become the crossroad of illegal trafficking in exotic animals and precious materials (like ivory and pangolins) because its laws are often less restrictive than those in China and it has virtually no tax.
The city has also become home to more than 20,000 Africans, but it is also an ideal spot for unscrupulous businessmen.
The arrest of Sam Pa, who is still in jail in Beijing, caused a sensation in 2015. He was considered the major go-between between China and Angola. Head of the Hong Kong-based 88 Queensway Group, he took full advantage of bank secrecy laws and operated far from the prying eyes of the Chinese government.
At his first summit with African leaders in Johannesburg, South Africa, in December 2015, President Xi Jinping pledged US$ 60 billion in funding to finance ten new partnerships with Africa, not only in infrastructure and real estate, but also in energy, industrial and agricultural projects, security and military cooperation as well as emergency food and health aid.
However, breaches of labour regulations are more common among Chinese firms than among other foreign-owned firms. Human rights groups have criticised working conditions at Chinese firms in Africa.
A study published by the Johns Hopkins China-Africa Research Initiative in February found that less than half of Chinese firms in Kenya had employment contracts for all their employees, compared with 100 per cent for American firms.
In 2011, Human Rights Watch said there were substantial employee safety violations in copper mines in Zambia run by Chinese state firms.