There is an index that reflects the loan interest rate of developing countries, called EMBI (developing country bond index). The spread between it and the bond index of developed countries can reflect the financing difficulty of developing countries.
Before the financial crisis, this spread remained at 200 points, which means that the average loan interest rate in developing countries is 2% higher than that in developed countries. By1October 24th 10, this figure has climbed to 840 points, which means it is almost impossible to borrow money from developed countries. The rise of this spread began after the financial crisis broke out in September this year.
This has two consequences for developing countries: first, it is difficult to obtain capital injection; Second, the development projects in preparation are delayed, especially those involving complex financing leverage.
To tell the truth, every country is seriously affected. Including long-term, medium-term and short-term loans.
Before the financial crisis, a country's short-term and medium-term loans could be extended after maturity, but now they are due, and the bank says I can't extend them for you. Even if these countries have good credit and prospects.
Of course it is. China and other countries with rich financial resources have a good opportunity to reconsider their global investment strategies.
In the first half of this year, China's foreign direct investment tripled compared with last year, which is a big increase. In Africa, China's investment is very active, and the current situation is more favorable to them.
China is actively investing in Africa, and the World Bank agrees.
Africa has great potential for economic development and abundant natural resources.
These two reasons are enough for China to invest. But we attach great importance to ensuring that the China government invests in good projects.
China has built a cement plant in Madagascar and a power plant and transmission equipment in West Africa, all of which are very good investments.
What are the advantages and disadvantages of China's investment in Africa compared with French, British and other established African countries?
Bond: Old countries certainly don't welcome new competition. The advantage of China lies in its abundant funds and low project investment cost. This is a great advantage.
But I have two concerns. China enterprises need to pay more attention to environmental protection and social impact when investing. If you build a power plant, you must do an environmental assessment. I believe that China companies have considered these aspects, but they should try to do as well as companies in developed countries such as Britain and France.
Another worry is that China companies employ a small proportion of local workers. I believe that as China companies adapt to the local environment and language more and more, they will hire more local people.
The current financial situation is really tense, but it should also be noted that rich countries are still very rich.
The size of the American economy is still very strong, which does not mean that the American financial industry will collapse. The same is true in Europe, although their growth will be slow. We should keep this in mind.
Even so, Asia really should play a bigger role in the world. In fact, before the crisis broke out, there was discussion about improving the role of Asia, and the crisis accelerated this change.
I see that sovereign wealth funds still tend to invest in rich countries. The reason why sovereign wealth funds are reluctant to invest in risky countries is that if they buy the assets of rich countries, they can clearly see the company's accounts and make them feel safe.
But in the long run, the return on investment in developing countries is much higher than that in developed countries. We studied the achievements of Japan's investment in rich countries in the 1980s. After 20 years, their income will not be so good. In the past 20 years, the return on investment in emerging markets has been dozens and hundreds times higher than that in developed countries.
If you want good returns, you really should consider developing countries. The place where you can make a lot of money may be the place where you can't easily read financial statements.
So I think it may be more reasonable for sovereign funds in the Gulf and China to invest in emerging market countries.
My advice to sovereign funds is: first, if they really want to make effective investments, they need to improve corporate transparency. This can reduce the resentment of the investment destination countries. Secondly, if sovereign funds invest in countries with political risks, MIGA can play its due role.