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China applies brakes to Africa lending

China applies brakes to Africa lending
Written by Publishing Team

This is an audio version of Financial Times News Brief Podcast episode: China puts brakes on lending to Africa

Joanna S Coo
Good morning from the Financial Times. Today is Tuesday, January 18th, and that’s the FT news brief.

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UK inflation figures were released this week. China is changing the way it lends to Africa. FT’s Hannah Murphy has been looking into her own Facebook plans. The company’s patent application indicates that it may pursue more data.

Hannah Murphy
Data that may not have been collected before, which could be your eye movements, your pupil movements, if your nose wrinkled, if you wiped your forehead.

Joanna S Coo
I’m Joanna Cao, with Mark Filippino, and this is the news you need to start your day.

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UK inflation is expected to rise to its highest level in 30 years. Tomorrow we will see data from December, and a Reuters poll expects inflation to be 5.2 percent. Economists point to rising energy costs, increased demand for most goods and services, and continued supply chain disruption. Now, given that the economic outlook is particularly uncertain during the pandemic, most experts predict inflation will peak in April. This has raised expectations that the Bank of England will raise its key interest rate several times this year.

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We’ve heard a lot about Facebook’s plans to build the metaverse. The company even renamed itself Meta. But how exactly are you going to make money from this virtual universe full of avatars? FT’s Hannah Murphy is looking for clues in a number of patent applications filed by Meta. She said many of them were for technologies meant to collect data they had never collected before.

Hannah Murphy
And these may be your eye movements, your pupil movements, if you wrinkle your nose, if you wipe your forehead, in order to strengthen its course. And that in two ways. One method could be used to guide you where you are navigating the metaverse if it tracks your eyes, for example. The other thing is to make sure that your avatar realistically reflects what you’re doing. This is kind of a patent camp. The second camp then looks closely at what their business model might look like. And we’re seeing indications from those patents that they’ll consider ads and personalized ads, which is very similar to the model we’re seeing right now.

Joanna S Coo
So Hannah, were there any other patents that jumped on you?

Hannah Murphy
The one patent that particularly shocked me, which talked about having some kind of scheme for a virtual reality store. And in this virtual store you can kind of go in and advertisers, for example, at night, they might sponsor something virtual, say a shoe. You go in and see this shoe, you can interact with it in some way. And then either you buy that shoe and have a real physical shoe in real life or the idea is that you have some kind of digital twin that lives in this world permanently. Maybe you buy virtual shoes that your virtual avatar wears. Facebook or Meta offers the possibility that you can either buy a digital good or a real good, and it is the advertiser who sponsors this in a virtual store.

Joanna S Coo
I bet there are some consumer privacy experts who have raised some red flags. What are some of their concerns?

Hannah Murphy
It is very likely that Facebook is collecting a lot of data that was not there before. And obviously there are concerns about how this data is protected, where is it stored, sort of that data will be entered into the custom advertising system that we just talked about? Obviously, there are concerns about whether people are somewhat aware of this and to what extent they can consent to it. It is currently a rather open field, and there is no legislation in this area. And so privacy experts are concerned and asking about it.

Joanna S Coo
Hannah Murphy is a technical reporter for the Financial Times.

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Africa has become dependent on China for much of its financing. China’s government lenders have become Africa’s largest source of development finance, but they are becoming concerned about potential defaults. The International Monetary Fund lists several countries on the continent as being at high risk of debt distress, so Beijing has been adjusting its approach to lending. FT’s Catherine Hill tells us about one Chinese $200 million loan to expand an airport in Uganda.

Kathryn Hill
We have noticed that the Ugandan legislators as well as some government officials of the Uganda Civil Aviation Authority have really worked on the terms of the loan which it seems that when it was signed about six years ago, about seven years ago, people were not actually aware of the terms of the loan. good print.

Joanna S Coo
The dispute made headlines. One newspaper suggested that China could seize the airport, and there were accusations that the loan might undermine Uganda’s sovereignty. But Catherine did not find anything predatory about the loan. She says the details reveal more about the way China has changed the way it lends to African countries.

Kathryn Hill
They started from resource-rich countries where they could back loans with guarantees in the form of future resource exports or future resource export earnings. And since they expanded on financing infrastructure construction in other African countries that were not rich in resources, they might also try to back some of these loans with a certain kind of security like other revenue, perhaps not from resource exports, but like the evolution of revenue from the airport being modernized. It appears to be the result of a learning process conducted by Chinese state banks in Africa. Part of the reason is that they have been active in some of the higher-risk markets. So they ended up writing some clauses in these loans which were historically usually used by international commercial banks to finance projects.

Joanna S Coo
And if there is any indication, Chinese President Xi Jinping recently said that Beijing would cut the amount of money it supplies to Africa by a third. It will also change the way it provides financing to the continent.

Kathryn Hill
It is gradually shifting from the main focus on lending, and is shifting more to investing, for example. So what we’re likely to see in the future is perhaps more collaboration projects with a smaller project size, and we might see more projects that focus on energy security and energy sustainability and more projects that focus on new types of energy sources. And also, there will be more focus on African HR training and that kind of thing. So maybe we’ll see less focus on loans and more on investment, we’ll see less focus on infrastructure and more focus on human capital.

Joanna S Coo
Catherine Hill is the Financial Times’ senior China correspondent.

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Before we go, Scotland runs largely on wind energy. Its government has awarded 25 gigawatts of offshore wind project development rights to companies including BP and Shell. This is more than double the current UK offshore wind capacity. More than half of these projects in Scotland will use a new technology called “floating” wind turbines. Offshore wind farms typically use turbines that are installed on the sea floor. But new technology allows projects to be built at sea at greater depths where wind speeds are higher.

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You can read more about all of these stories on FT.com. This was your daily FT news feed. Be sure to check back tomorrow for the latest business news.

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