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China-Africa Fund Finds Investing Harder Than Expected, CEO Says

Dec. 6 (Bloomberg) -- The China-Africa Development Fund has found investing in the African continent more difficult than expected after committing almost all its first $1 billion, Chief Executive Officer Chi Jianxin said in an interview.

The state-owned private equity fund, which began in June 2007, has not been able to exit any of its investments to realize a profit, Chi said yesterday in Beijing. It is still seeking a ¡°beneficial result¡± in the long term, he said.

¡°When we started, we didn¡¯t have investing experience in Africa, and we hoped to have a quite good profit in three to five years so we could exit investments,¡± said Chi, who first visited Africa in September 2007 after becoming chief executive. ¡°But we¡¯ve seen it¡¯s not so easy as that.¡±

The fund may consider future investments in building materials, infrastructure, mining and agriculture, Chi said. China is Africa¡¯s largest trading partner and has signed agreements worth billions of dollars with African governments, seeking natural resources to feed its economic growth in exchange for building roads and railways, and nurturing a market for its products.

The fund, China¡¯s largest African private-equity investment vehicle, hopes to raise money in the market in the future, Chi said. It plans to get its next $2 billion from parent China Development Bank Corp., he said.

¡°High Risks¡±

¡°We very much hope that in the future we can raise money from the market but from the current situation, because African investment is long-term and has high risks, that is difficult.¡± Chi said.

Chinese President Hu Jintao announced the fund at a meeting of China and African leaders in 2006 with a target of $5 billion. The Beijing-based fund has helped Chinese companies build a power plant in Ghana, a port in Nigeria and cotton farms in Malawi and Mozambique. It does not take controlling stakes in projects.

Trade between China and Africa rose an average of 28 percent a year between 2001 and 2010, the Ministry of Commerce said last month.

Chi said the next $2 billion of funding will probably be completed by the next Forum on China-Africa Cooperation, which should be held before the end of 2012.

¡°From a point of view of a money manager, the more simple the funding, the better,¡± Chi said. ¡°We think CDB investment is the simplest.¡±

The fund generates enough cash flow to maintain its operations and has made a small profit so far, Chi said. The Chinese government doesn¡¯t interfere with the decisions of the fund, he said.

The fund opened its first West African office on Nov. 11 in Ghana, its fourth regional site in Africa. It has offices in South Africa, Ethiopia and Zambia.

Beijing-based China Development Bank has lent $7 billion to more than 30 countries in Africa, Wang Yuan, the bank¡¯s chief economist, said Nov. 5.

Web link: http://www.businessweek.com/news/2011-12-06/china-africa-fund-finds-investing-harder-than


'Black Hands' in Hong Kong

Beijing's political interference is reaching ugly new heights.

The coming year will be a critical one for Hong Kong politics. Here's one way to tell: The pro-Beijing media's smear campaigns are plumbing new depths of defamation.

Elections for District Councils last month kicked off a rare year in which all levels of government turn over. Later this month, the territory's business and professional elites will select the members of a 1,200-member committee that will choose the territory's next Chief Executive early next year. Next year, those elites will pick half of the Legislative Council, while a complex electoral system of geographic constituencies determines the other half.

Hong Kong may still be far from full democracy, but there's enough uncertainty about the results to give Chinese officials sleepless nights. So in recent months they have ginned up a fresh campaign to accuse pro-democracy politicians of being stooges of foreign powers.

Publications controlled by Chinese officials and their allies are publicizing the donations of a local media entrepreneur, Jimmy Lai, to local pro-democracy parties as well as to the head of the local Catholic Church, Cardinal Joseph Zen, who supports pro-democracy causes. These donations were legal, but the writers allege Mr. Lai is a conduit for foreign money and influence and that the recipients are unpatriotic or even traitors. References to a "gang of four" and a rally of 2,000 people outside the headquarters of the pro-democracy Civic Party calling its leaders "black hands" recall the struggle sessions of the Cultural Revolution.

Eastweek magazine, which is owned by a member of the Standing Committee of the Chinese People's Political Consultative Conference (CPPCC), suggested that Mr. Lai does not have the resources to make $5.4 million in donations over seven years, and that the funds came from the U.S. government. Considering Forbes magazine estimated Mr. Lai's wealth at $660 million in 2009, this doesn't make sense. He denies the accusation and is suing Eastweek for libel.

China Daily meanwhile accused the Democratic Party of being American "avatars," while the Ta Kung Pao called another party's leader a "political gangster." A Hong Kong Commercial Daily editorial labeled Cardinal Zen "a political mercenary paid to fight for an unjust cause." Lau Nai-keung, a member of the Standing Committee of the National People's Congress (NPC), wrote in the South China Morning Post, "Some of the money given to Cardinal Zen, for example, was used to fund underground churches on the mainland, an act that could be deemed treasonous."

While the exact amounts of Mr. Lai's donations were news, it was public knowledge that he was the largest supporter of Hong Kong's pro-democracy parties and a leading light in the Catholic Church. Nor is it any mystery where his money comes from: He owns the most profitable publications in Hong Kong and Taiwan.

Beijing's smear campaigns preceding elections have a long history. Mirror magazine, founded by another CPPCC Standing Committee member, accused the U.S. government of interfering in Hong Kong politics ahead of Legislative Council elections in 2004. In 2006 Mirror was joined by the state-run Bauhinia magazine, which published six articles on U.S. interference. That material was repeated by other publications in the run-up to the Chief Executive election.

Another crescendo of anti-U.S. rhetoric came in 2007. Former Democratic Party Chairman Martin Lee wrote an op-ed for this newspaper urging the U.S. to press China on its human rights record ahead of the Beijing Olympics. The article was blatantly and repeatedly misquoted by the pro-Beijing media as calling for a Western boycott of the Olympics, and the Democratic Alliance for the Betterment of Hong Kong (DAB) distributed leaflets calling Mr. Lee a traitor. That raised the temperature ahead of District Council elections and a high-profile legislative by-election.

The extreme rhetoric may have encouraged triad-connected individuals to attack pro-democracy figures. Barrister Albert Ho, chairman of the Democratic Party, was savagely beaten in a downtown McDonald's in 2006. The police narrowly foiled an assassination plot against Mr. Lee and Mr. Lai during another election campaign in 2008. The triads maintain close ties to Beijing. In 1993, China's minister of public security endorsed the Sun Yee On, Hong Kong's largest criminal group, as "patriotic."
Verbal and physical attacks constitute their own form of interference in Hong Kong politics. In 1989, then-Party General Secretary Jiang Zemin famously used a proverb, "The well water does not interfere with the river water," to forbid Chinese government interference in Hong Kong's politics and vice versa. Respecting Hong Kong's autonomy was one of the promises China made in the 1984 Joint Declaration, an international treaty with the U.K. that the U.S. and others have a legitimate interest in China upholding.

Since the political unrest in 2003 over proposed laws to restrict civil liberties, however, Beijing has abandoned its hands-off approach and expanded the responsibility of the Central Government Liaison Office in the territory. One of its staff wrote an article in 2009 saying it constitutes a second "ruling team" alongside the Hong Kong government.

Meanwhile, the pro-Beijing parties benefit handsomely from donations by local business people. The DAB, for example, received eight times as much in donations as the Democratic Party in the most recent fiscal year on record, 2009-10, according to government filings.

Hong Kong's businessmen with mainland interests, which is almost all of them, know that they must give to the pro-Beijing parties, and that giving to the other side would be suicide. Such donations are supposed to be private, but it is common knowledge that Beijing has infiltrated the pro-democracy parties, and Mr. Lai's experience is instructive. The fact that the pro-democracy parties would be in dire financial straits without Mr. Lai's support¡ªhe gave 64% of the donations to the Civic Party last year¡ªshows how strong Beijing's influence is.

The Hong Kong government won't pass a law governing political parties because there is one party whose activities in the territory must not be openly discussed: the Chinese Communist Party. As a result, donor transparency will never be mandated. That's a pity, because we suspect the pro-Beijing parties' list of supporters would make interesting reading.

And when it comes to "black hands," the District Council elections last month suggest that if anything the sinister dealings are not on the pro-democracy side. The democrats pointed out a suspicious pattern of hundreds of people registering under fake addresses to vote in particularly close races. In a few cases this may have swung the results. The government says it is investigating.

In the privacy of the ballot box, the pro-democracy politicians poll a majority of the popular vote. Outside it, Beijing and the Hong Kong government have practically made them pariahs. Beijing's interference in Hong Kong's politics has reached such ugly and threatening heights that it's time the U.S. and other Western nations that are accused of meddling called Beijing out on it.

Web link: http://online.wsj.com/article/SB10001424052970203833104577069863869040358.html?mod=googlenews_wsj


Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial, intellectual property, and labor and employment matters. For further information on any issue discussed in this edition of China IP In The News or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com.

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