China halts Libya investment

China Daily, March 22, 2011

ZTE headquarters in Shenzhen, Guangdong province. Some Chinese companies, including ZTE, China's major telecom equipment maker, have been seriously affected by the political unrest and subsequent airstrikes in Libya. [China Daily]



The Libyan turmoil will not hurt China's investment and business in Africa as a whole, although investment activities have been halted after the breakout of the unrest, officials and experts said.

Early on Sunday, Western countries, including the United States and France, launched airstrikes and fired cruise missiles, a month after the unrest erupted in some Libyan cities in February.

China will not make new investments in Libya in the short term until the Libyan situation stabilizes, an official with the Ministry of Commerce said on Monday.

"Before the situation becomes clear, the exchanges between China and Libya in terms of trade, construction contracts and investment will be seriously affected," an official in charge of West Asian and North African affairs of MOFCOM said on condition of anonymity.

"I am afraid that China is unlikely to make any new investments there soon," the official added.

Chinese investment in Libya is mainly in the energy and construction sectors. Some Chinese project contractors, including China Gezhouba Corp as well as China Railway Construction and Metallurgical Co, have projects in Libya.

But since the political unrest broke out in February, most Chinese companies in Libya have either withdrawn or stopped operations and a large number of people have been evacuated.

"We are closely following what will happen there. But before everything gets back under control, we will not send any people there," said Zhang Hui, spokesperson of ZTE Corp.

In the past month, the second-largest telecommunication equipment maker in China has evacuated 88 staff members, and only 20 local employees remain on duty for daily operations.

"The company will continue to cooperate with our partners in the future, when the time is right," Zhang said.

ZTE Corp is the largest telecommunication equipment provider in Libya, and has made investments worth 3 billion yuan ($457 million) since 1999, the CBN TV channel said.

However, many experts said China's determination to invest in Africa will not change.

"Although the investment in Libya gets delayed, China's investment in Africa will not be affected," said Wu Fang, senior researcher of China-Africa Research Center of International Trade and Economic Cooperation.

"We are not much worried about the business in Africa, as we have projects in many African nations and could shift the human resources and efforts elsewhere," said Jin Chengsan, chairman of the trade union of China Gezhouba Group International Engineering Co.

No official figures have been released yet, but experts predict the losses Chinese companies incur from the Libyan unrest will be big. Some executives at ZTE Corp said the company will probably lose 100 million yuan in the Libyan turmoil.

The unnamed MOFCOM official urged Chinese companies that want to expand business in Africa to raise their awareness of guarding against risks, especially political risks.

"They should establish an early-warning mechanism to minimize risks," the official said.

China Export & Credit Insurance Corp has launched an urgency settlement mechanism after the unrest swept through much of the Arab world, raising the risks in some nations and sending warning messages to Chinese exporters.

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