THE LAWYER
23 MARCH 2009
CHINA
Cash-rich China’s interest in
resource-rich Africa has
grown enormously over the
past 20 years, with Chinese
companies investing in
everything from mining to infrastructure
projects.
In recent years China’s focus has changed,
developing from an interest in mineral-rich
countries to include those involved in trade
and infrastructure projects. For the lawyers
advising on the deals this can only mean one
thing – increased workloads.
Kian Heong Hew, head of Pinsent
Masons’ Shanghai office, says the firm is
experiencing a surge in opportunities to
work for Chinese construction and
engineering companies on international
projects that span countries such as Algeria,
Botswana and Sudan.
Certainly the African demand for new
and better roads, school buildings,
computer networks, telecoms systems and
power generation has seen a raft of Chinese
companies rush to the region.
Although Hew feels that domestic
Chinese firms will benefit to some degree
from this increase, he believes that in
general Chinese companies are looking to
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SPECIAL REPORT 29
Enter the dragon
As a country with
few natural resources,
China has always
had to look abroad for
investment. Margaret
Taylor reports on the
Sino-African special
relationship
international firms with a presence in China
for their legal needs.
“Our experience is that most Chinese
companies going international, including
to Africa, generally prefer international
players – in particular those with a presence
in China as well – because of their
international experience and also wider
network,” he says.
As Chinese investments often arrive in
Africa via the Middle East, Hew adds that an
international footprint that includes Gulf
offices can be an advantage for firms
advising on Sino-African matters.
“Until very recently, the United Arab
Emirates was very popular with Chinese
companies. Qatar, Iran and Saudi Arabia are
also very popular destinations,” he says.
That said, Haibin Xue, managing partner
of Chinese firm Zhonglun W&D, says
Africa-related work has also increased for
his firm in recent years, with the scope of
that work varying depending on the type of
Chinese investment being made.
“With the increasing investments from
China into Africa, the legal work increases
accordingly,” he says. “For Chinese law firms
the work generated is mainly associated
with the investment, such as pre- investment
PHOTOLIBRARY
restructuring of the investing companies to
suit the specific investment needs, dealing
with numerous official approvals processes,
advising on compliance issues under
Chinese policies and law and negotiating
on the client’s behalf with the relevant
parties on investment terms.”
In terms of the type of work Chinese
companies are focusing on in Africa,
Pinsents’ Hew points out that infrastructure
has always been a focus, but adds that this
focus has increased recently because the
Chinese government is looking to finance a
growing number of projects.
“The Chinese government is garnering
support from less developed countries by
financing infrastructure construction in
these countries through the China Exim
Bank,” he explains. “The construction of
these infrastructure works inevitably goes to
Chinese construction and engineering firms,
so the monies China spends really go back to
China. The financing of infrastructure
projects is also a means for China to make
friends with resource-rich countries. Chinese
construction and engineering companies
made up at least 20 per cent of the top 225
contractors working internationally last year,
possibly the most from one country.”
Xue agrees that China, which is not a
country rich in natural resources, has been
pushing its relationship with Africa as a
means of gaining resources in exchange for
work on projects.
“Historically China has assisted a lot of
African countries in building roads, railways
and power stations when the world was in
China has assisted a lot
of African countries in building
roads and power stations in
the Cold War stage and this
has changed into being
more on commercial and
economic grounds in the
post-Cold War stage
Haibin Xue, Zhonglun W&D
the Cold War stage and this has gradually
changed into being more on commercial
and economic grounds in the post-Cold War
stage,” he explains.
Looking to the future, Xue believes the
Sino-African bond will get stronger with
foreign direct investment from China into
Africa set to continue. With M&A and
project finance work involving Chinese
investors almost certain to keep the lawyers
busy in the medium term, Xue believes the
relationship could develop even further in
the long term.
“It’ll gradually lead to a two-way process
to potentially include investments from suitable
African investors into China,” he says.
Hew agrees, adding that domestic
Chinese firms are positioning themselves
to be able to handle a larger portion of that
work in the future.
“In our specialist area of construction and
engineering, there are a few Chinese law
firms that are making headway representing
Chinese companies on projects,” he says. ■
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