ICBC buys into Standard Bank Group, furthers China’s reach in Africa

Industrial and Commercial Bank of China(ICBC), the world’s largest bank by market capitalization, is buying 20 percent of South Africa’s Standard Bank Group Ltd. Standard Bank is based in Johannesburg and has branches in 18 African nations. The USD $5.5 billion price tag marks the most expensive overseas investment by a Chinese firm to date. Earlier in the week, CITIC Securities, also a state owned company, swapped USD $1 billion worth of equities with Bear Stearns. Both tie-ups are just the latest examples of corporate China’s aggressive international merger and acquisition binge, started back in 2004 when Lenovo bought IBM’s PC business.

But, the ICBC move has an added layer of political complexity: the bank is majority owned by the Chinese government. As a 25 percent shareholder of Standard Bank, the largest bank in Africa, ICBC, therefore by extension China, now has a direct mechanism with which to shape Africa’s finance. And just so happens, Beijing has taken a real interest in Africa as of late, what coincidence! Senior Chinese leadership, including both President Hu Jintao and Premier Wen Jiabao have, on separate occasions, led good will tours to the continent. Last November, Beijing organized a two day China Africa summit, attended by leaders of more than 40 African nations.

Most Western observers believe China's foreign policies towards Africa are driven directly by China's voracious appetite for natural resources. A strong Sino-African bond would ensure China's mineral and oil needs are met for the next decade and beyond. Some have gone so far as calling China a “neo-colonialist”, a charge China, of course, vehemently denies. What is undeniable however is China's growing influence on Africa, eerily reminiscent of empire building campaigns undertaken by prior superpowers. Whether China will actually go down that road remains to be seen.

Jay Sheng is Shanghaiist's Business Editor. Email tips, news and gossip about business in Shanghai and China to biz at shanghaiist.com.