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TheStreet Open House

China Is Reaping Africa's Riches

Stocks in this article: E CNPZ SNP ABX CMI CAT RDS.A

In 2006, China's herculean state-run offshore oil driller CNOOC Ltd. (CEO) announced it would buy a $2.3 billion stake in a Nigerian deep-water oilfield, according to the Japan External Trade and Development Office's Institute of Developing Economies. A few months later, the institute said, China Petroleum & Chemical (SNP) secured claims worth $2.4 billion to look for oil in waters off Angola.

To supply minerals for China's quick development, Africa is there again. China relies on sub-Saharan Africa for cobalt imports and looks to the same continent for much of its manganese, the Institute of Developing Economies says.

In one landmark tie-up, African Minerals (AMI:L) made a deal with China Railway Materials Commercial three years ago for extraction of steel-related products.

China has stymied the West, despite its traditional and often longer-standing ties with African countries, with its approach: giving development aid to the places where it seeks resources.

Beijing has extended grants and zero-interest loans to Zambia, for example, since the 1960s, and what a payoff: China now has 99-year rights to the African country's Chambishi Copper Mine, the largest foreign nonferrous metal mine approved by Beijing for development and construction.

For sub-Saharan countries China has donated drought-relief supplies even during its own periods of natural disasters.

"China's 'new foray' into Africa is attracting much international attention and contentious debate," the Centre for Chinese Studies under the University of Stellenbosch in South Africa said in a 2008 report -- and the nation's position is only stronger five years on.

"China is seemingly engaging Africa on new terms -- terms that are not shaped by traditional powers, nor perhaps even by Africans themselves," the report says. "It represents a new approach to the continent...a collaborative state-business approach to foreign policy. China's foreign aid forms an integral component of this paradigm."

This is what puts China in the lead. Western countries where other companies are seeking resources in Africa don't feel the pinch that China does, as their GDPs aren't growing as fast while oil and minerals may be available closer to home. So they're not doing anything that's ambitiously special to help African countries develop.

But what if some day they suddenly need a new source of oil and minerals?

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