Financing Social Housing in Africa: China Eximbank’s Practice

through Cases

Li Fusheng

Credit Appraisal Committee

The Export Import Bank of China

AUHF Conference

Mauritius, Sep 11-13, 2013

From China to Africa:

The Cooperating Path: *social/ development sector(00’-10’)

*city and national infrastructure(00’-10’)

*natural resources dev(1990’-2000’)

*agriculture/tech training(1970’-80’)

*Tan-Zam railway(1970’)

*medical/agri team(1950’-60’)

China Eximbank•  • Established in 1994• One of two policy banks in China• Under Direct leadership of the State Council and wholly

owned by China’s central government. Its credit rating is same as China’s sovereign rating.

• The only governmental concessional loan channel authorized by Chinese government.

• More than 20 branches in China.• Rep Offices in Johannesburg, Paris and San Petersburg. • The world largest official ECA.• The main financing institution for China’s international

business cooperation and overseas investment.

Internal Organization Chart

Moody’s Investors Services

A2 A2

Standard & Poor’sA A

Main Business LinesMain Mandate

• Implementing government policies• Providing financial support for export & import• Supporting Chinese enterprises’ oversea businesses• Enhancing international economic & trade cooperation

Business Scope • Export / import Credit• Chinese Government Concessional Loan• Onlending loans from foreign governments and financial institutions• Export credit guarantee• International and domestic settlement• Fund raising in home and international capital market  • 。。。。。。

Government Concessional Loan

Chinese Gov

（ Mofcom ）

Chinese Gov

（ Mofcom ）

Foreign Gov

（ borrower

）

Foreign Gov

（ borrower

）

China Exim

（ lender ）

China Exim

（ lender ）

Foreign Sponsor/imp

orter

Foreign Sponsor/imp

orter

Chinese Contractor/e

xporter

Chinese Contractor/e

xporter

7Milestone remittance

4 Loan agreement

9 loan repayment

提交单据

报告进程

6

5 billing and payment

Commercial contract

8拨付贷款

1loan application

3master agreement

2 Repot the appraisal

• Trade and Investment between China and Africa

• Based on their population and mutual compliments, Sino-African bilateral trade increased from just USD 10 billion in 2000 to over USD 100 billion in 2008, and reached a value of USD 129 billion in 2009 the year China became the biggest trade partner for Africa. The figure then is $198.4 billion in 2012.

• By the end of 2011, China invested USD 15 billion in Africa in term of FDI.

• Take China Eximbank as an example, the bank financed more than 500 projects in Africa and most of them are focusing on improving people’s life and infrastructure.

• According to Fitch Ratings, China Eximbank surpassed the World Bank and became the largest loan supplier to Africa in the past ten years.

• China Eximbank’s social housing finance:

a global picture

• Housing financing by Eximbank covers different continents. These targeted countries include Maldives, Mongolia, Zambia, Tanzania, Botswana, Madagascar, Seychelles, Mozambique, Cameron, Congo Republic, California, Dubai, Algeria, Sudan, Fiji, Benin, Malawi, Equatorial Guinea, Verde Cape, Kuwait, Libya, Surinam, Jamaica, etc. (Angola)

• Total approved credit in housing from Eximbank is RMB 33.1billion (incomplete statistics). Among of them the biggest project financed by Eximbank is Dubai’s social housing which is up to RMB16 billion/$2.49 billion guaranteed by Dubai’s Ministry of Finance. But the most market destinations are in Africa, which is up to 40.4% in total approved credit value, covering around 20 countries even though Eximbank financed an investment project for retiree senior apartments buildings in California, USA.

• China Eximbank’s social housing finance:

a global picture• Social housing in Congo(Republic)

• China Eximbank’s social housing finance:

a global picture• Social housing in Botswana---Land and Housing Minister of Bots

• China Eximbank’s social housing finance:

a global picture• Social housing in Botswana• As early as in and before 1998, Eximbank financed the social

houses in Botswana. At that time it issued concessional loan credit to Botswana with a tool of 5-year revolving credit line to finance affordable and social housing project (425 apartments/houses) which located in both the capital city and other populated cities.

• The contractor: China Overseas Engineering Corp.

• The case proved that nearly same time as China was kicking off to develop the natural resources ( oil and gas) in Africa it did finance social and sustainable projects.

• China Eximbank’s social housing finance:

a global picture• Chinese ambassador is visiting the social housing

construction site in Algeria

• China Eximbank’s social housing finance:

a global picture• In 2010, Shenyang International Cooperation Company and Cameron

Department for Urban Development and Housing signed a 1500 apartments contract. The contract value is up to RMB 524million and among of it RMB450million financed by China Eximbank. The rest was financed by Cameron government.

Financing Practice through Case PerspectiveProject： Congo(Rep) Brazzaville –Mopila 264 units social housing

Borrower ： Congo Rep Department for Economic, Finance, Plan ,Public Assets and Integrity

March 2012, military munitions house bombing happened in the capital city and caused a big loss both in life and in economy. The nearby resident houses were deleted and 15000 population became homeless.

During G 20 Summit, Congolese president officially asked assistance from China. Premier Wen Jiabao expressed Chinese companies and banks would participate the reconstruction.

March 2013, President Xi Jinping visited Congo Rep. China Exim and the Department signed a $ 500 million loan package for reconstruction agreement. The housing project is the first one in the package. The total construction area is 49000 square meters including 33 buildings for housing, shopping mall, center square, and basketball ground. The construction period is 36 months. China contents are 65%.

Case 1: 264 unit houses in Brazzaville Domestic approval: China Association of Foreign Engineering

Contracting issued a letter of coordination. A supporting letter from Chinese embassy economic division. Bidding permission by Chinese ministry of commerce.

• Foreign approval: the commercial contract was approved by Congolese president Sasue and the feasibility study and permission for land use are approved.

• Contractor: China Weihai International, established in 1988, registered capital RMB 50 million. Officially certified foreign contractor. Entered in Congo in 1996. it constructed 26 projects including Duri Sports Facility, 815 social housing project, the capital airport main building. It completed total value up to $ 594 million in Congo Rep. It has a good track record. In the end of 2012, its total assets is RMB 2.45 billion.

• The project’s contract price is $64.47 million, among of it 15% will be financed by Congolese side and 85% financed by China Eximbank.

264 unit houses in Brazzaville• Risk analysis framework：• Country risk, construction and performance risk, legal risk,

repayment risk

264 houses in Brazzaville

• Credit terms and conditions:• Borrower: Congo Department for Economy, Plan,

Fi8nance, Public Assets and Integrity.• Lending: $ 54.8 million (85% of commercial contract)• Term: not longer than 180 months, grace period 60

months.• Interest: fixed.• Management fee and commitment fee, risk premium fee.

Call before first remittance • Guarantee:• Repayment: equally half year.

Case 2: $ 365.5 million concessional export buyers credit, Zambian Military Residential Housing

• In 2009, Chinese government announced a $ 7 billion of concessional export buyers credit at Sino-Africa Cooperation Forum.

• Mar 2010, the Mofcom mailed Chinese Embassy in Zambia and put the housing project into the list of $ 7 billion loan as an exception.

• In 2011， Zambia had presidential election. For wining the support from military and improving army housing conditions, stabilizing society, the government asked to use the quota in the loan commitment from China. It planned to build 4527 sets houses in Lusaka and other two cities for air force, army, and presidential office. The program was listed in priority in the 6th state plan.

$ 365.5 million concessional export buyers credit, Zambian Military Residential Housing

• Dec 2009, China Machinery Industry Group Corporation and Zambian Ministry of Finance and State Plan signed the business contract. The value is $ 430 million. Then Zambian Ministry of Finance issued loan application letter and the feasibility study to China Exim. Chinese commerce division at the Embassy recommended the project and commended that the project would be very meaningful for bilateral political and diplomatic relationship.

• As regular practice, 15% of the contract value financed by Zambian side and 85% by China Exim.

• Term is 20 years including 5 year grace period. • Borrower: Zambian Ministry of Finance and State Planning. • Repayment: equally, semi year.

$ 365.5 million concessional export buyers credit, Zambian Military Residential Housing

• Risk analysis:• （一） country risk and repayment risk• Zambia is stable in politics and friendly to China. In recent year,

the two countries are cooperating in copper mining and agricultural sectors.

• （二） performance risk• The contractor National Machinery Group is ranked No 28 in

the Global 225 Contractors 2009. it is experienced in overseas contracting. But the project is its first task in Zambia and its is first time to adopt thin plate steel structure engineering thus some uncertainty may be there.

$ 365.5 million concessional export buyers credt, Zambian Military Residential Housing

Chinese ambassador to Zambia is visiting Zambian housing construction site, June 28, 2013

THANK YOU!

lifusheng@eximbank.gov.cn