Chinese firms see Zimbabwe on the up

The signing ceremony in Qingdao of an agreement to build an economic and industrial park in Zimbabwe. Provided to China Daily

A promising industrial park built with chinese investment is planned to mine nation's potential

A 100 trillion banknote in the now defunct Zimbabwean dollar became a symbol of this nation's hyperinflation-wracked economy several years ago, but Chinese companies see this country as a potential industrial giant waiting for takeoff.

Zimbabwe had a relatively good industrial foundation in the mid to late 20th century and, given its strategic position among southern African countries, it is poised to begin large-scale industrialization in which Chinese companies can play a significant role, says Jia Quanchen, chairman of Hengshun Zhongsheng Group Co Ltd.

Jia's company, which produces power transmission and control equipment, is planning to collaborate with other Chinese companies and the Zimbabwean government to build an economic and industrial park in the country to further stimulate its development and transformation.

Emmerson Mnangagwa, vice-president of Zimbabwe, says in such special economic zones, investors are expected to benefit from a number of preferential policies supported by law. They would be able to put up industrial parks and factory shells to rent to other companies.

He spoke at the signing of an agreement on the project during a recent two-day visit to Qingdao in eastern China's Shandong province. Qingdao is home to many giant industrial and home appliance manufacturers like Haier and Hisense.

"The government and the people of Zimbabwe are ready to render all the necessary support to protect Chinese, as indeed all foreign investments in the country," Mnangagwa adds.

Details of the amount of money to be committed and the park's scale are still being negotiated, officials say.

The three major investors in the project are Hengshun Zhongsheng, China Railway Eryuan Engineering Group Co Ltd and Qingdao City Construction Investment Group. It is supported by the government of Qingdao, the Ministry of Industry and Commerce of Zimbabwe, and China Development Corp, which promotes trade between China and the rest of the world.

Jia says private companies play a crucial role in China's "go global" strategy and the Belt and Road Initiative through use of their industrial advantages and overseas experience.

"We started investing in the overseas market in 2011, and now we have established a ferronickel industrial park in Indonesia. We have developed and accumulated our experience in industrial park investment, development, attracting business, and operation," he says.

"The signing of the memorandum of understanding is a recognition of our industrial park strategy. Also, we highly value Zimbabwe's advantages in resources, investment environment and future development potential, thus we intend to copy our Indonesian strategy in a more sophisticated way in Africa," he adds.

The industrial park will at first draw strength from power generation, and once the infrastructure is in place, it will focus on processing industries like mining and other types of manufacturing to increase the value added to local raw materials. This should establish a full industry chain and benefit both upstream and downstream business, Jia says.

This project is a significant trial of the Belt and Road Initiative, under which both state-owned and private companies are together investing in foreign markets. The initiative refers to the Silk Road Economic Belt and 21st Century Maritime Silk Road, which would use trade and investment to boost ties along ancient trade routes and elsewhere.

The industrial park is expected to further accelerate the transfer of China's excess capacity, capital, technology and management, with a focus on railway construction, as well as power generation, metallurgy and agricultural equipment exports, according to Jia.

Zimbabwe is endowed with abundant natural resources like diamonds, platinum, gold, chrome and iron ore. In 2014, trade between the two nations reached $1.24 billion.

Mnangagwa says that as an all-weather friend, Zimbabwe has been learning from China for years and that this exchange will provide an essential window for Chinese businesspeople to enrich their understanding of his country.

The mining sector will require $5 billion to $6 billion in the next five years to increase its capacity, so investment in this field in advanced extraction skills and technologies is welcomed, he says.

He also says use of joint ventures is an essential strategy in supplementing the nation's limited financial resources. The government encourages joint ventures in various forms, including build, operate and transfer; build, own, operate and transfer; build, lease and transfer; and other programs to attract outside capital.

A high-level Zimbabwe-China investment conference is planned for Harare this year to attract more Chinese to increase trade and investment, Mnangagwa says. He says industrial parks such as the one being planned will be a significant pivotal point for future investment from China.

Yao Gang, a board member of Hengshun Zhongsheng, says when transferring industrial assets to overseas markets, it is vital to first take into account the local development advantages and potential for localization.

"Benefiting local society and residents is a long-term focus of our business in Zimbabwe, too. For instance, we haven't yet built our industrial park, but we have begun the first-stage implementation of a donation program to benefit local schools," he says. "Social responsibility is not just a slogan, but it is an action that we are engaged in all the time."

It's vital to establish a sustainable development strategy in overseas markets, especially for a newcomer, he adds.

"This kind of overseas industrial park strategy improved our revenue, so that in 2014 sales of packed industrial park machines and equipment reached 203 million yuan ($32.7 million), of which 50 percent was from overseas markets," he says. "And just in the first quarter of this year, the export volume exceeded 216 million yuan. Our expectation of net profits in the first half of the year is between 177 million and 187 million yuan."

Qingdao, an important light industry base in eastern China, is ready to support the company's overseas expansion, Yao says.

"Zimbabwe is one of the more developed countries in sub-Saharan Africa in terms of industrial network, so it is very strategic when exploring the African market," says Zhang Xinqi, mayor of Qingdao.

"In 2014, trade volume between Qingdao and Zimbabwe reached $19.43 million and the industrial park project will add more potential to this relationship."

Contact the writers at lilianxing@chinadaily.com.cn