Tracking China's Dominance of the Transition Minerals Trade
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Hello and welcome to another edition of the China in Africa podcast, a proud member of the Seneca Podcast Network. I'm Eric Olander, and as always, I'm joined by CGSP's Africa editor, Jero Nima, joining us today from the beautiful island of Mauritius in the Indian Ocean. A very good afternoon to you, Jero.

Good afternoon, Eric. Géraud, just as we are coming on to air this week to record today's show, some news broke from the team at Bloomberg that the Democratic Republic of Congo, your country, says it's going to be suspending cobalt exports for four months to rein in oversupply

of the battery metal on the international market. This, of course, is a topic that you and I have been covering quite a bit over the past six months. This is going to be a major setback for the Chinese company Simak Group that gave output guidance earlier this year that it was going to produce 100,000 to 120,000 tons of

cobalt for the year. Now, that would be a new record if they did that. Bear in mind that last year they produced 114,000 tons of cobalt, which that was a record. Now, what makes this so strange and so odd and why the DRC government is taking the actions that it's doing is because, well, the price of cobalt about two or three weeks ago hovered at $11 a pound, about $24,000 a ton, which is at what I

Eight-year low, Giro? I mean, these prices are very, very low. Back in 2018, just to give you some context, Cobalt was $40 a pound. Giro, what are you hearing from your sources on the ground as to what's going on and why the government chose to act now? There's not much of a surprise, I believe, in that decision. Because since two years ago, they've been talking about introducing export quota in the DRC to be able to control production and the export on the market.

And Jack Amin was pushing for that. And the Congress Authority was still trying to figure it out. And there's many pushback from international market investors saying that it was going to be a bad idea. But I know that different people from Jack Amin and different companies involved were really trying to make that happen.

because it was the only way for the DRC to control the price of the market. People need to understand that DRC being the first producer of cobalt in the world, when you have cobalt prices crashing like that, it means that revenues are also lowering in the DRC part, which they don't want to because they cannot control the price. They cannot control production. They cannot control production because they don't have mining companies that are

really mining those minerals and exporting them. The only thing they could have done, it was putting in place export quota to be able to control the flow in the market. But even in terms of export quota, they were not able to put that in place to implement that. And then we have that decision to be able to halt, totally halt export for four months. But let's keep in mind, it's only halting export, not halting production. So it means that if you believe that four months is going to be enough to control the price of the market, it will not stop

C-MOK or any other company to produce cobalt and to keep it in stock. When export will open again, they still can do the same thing they did in 2023. So it's not much of a solution on the long run in terms of how much is going to impact the market. If they believe that in four months it's going to be enough, we'll see. But if in four months China...

even now, China is still controlling the quantity that's available in the market. So I don't believe that that's going to have a long-term effect in terms of controlling the price. For four months, we may see a slight change. We'll not go for $24,000 to $35,000 or $40,000. No, we'll not see that. We may see a bit of a change, but after four months, CMOC will do exactly the same thing it did in 2023, just flood the market again with the

all the stockpile it did in the OSIM, we're going to go back to where we are today and maybe even worse than what we have today. And of course, Géraud, there are other demands being placed on cobalt, which is the fact that fewer companies are using it in their cars. So General Motors is going to be releasing vehicles this year that use lithium phosphate batteries, not

nickel, cobalt, manganese batteries. A lot of automakers are making that shift, again, reducing the demand for cobalt. Want to get your take on one other quick story before we get to our guest today. Chinese arms manufacturer Norinco has apparently sweetened its deal for the copper and cobalt assets of Shemaf.

Now, this is a $1.4 billion deal to buy those assets. And for those of you who are not familiar with this story, Shemaph is the Congolese subsidiary of the Dubai-based firm Shalina Resources. Shemaph is also a very close partner with the Swiss trading conglomerate Trafigura that's also very active across the critical resources sectors in Southern Africa.

Chamath is selling at stake in the DRC copper and cobalt sector in large part because of those low prices that Gérard was talking about earlier that's just made it unprofitable to be in this sector. So Gérard, when I read this story,

It brings back these memories of 2016 in the first Trump administration when U.S. mining giant Freeport McMoran sold the Tenka Fungurume mine and American officials told you and I directly that this was a strategic mistake of just magnificent proportions. Here we are with another major Congolese mine going up on the market and it looks like Chinese companies like Norinco are in the pole position to snap it up.

Yes, but a few corrections here because we'd like to have the naming and the words really correct. First of all, the Chinese who are listening to us when they say Norinco, they're going to get mad because it's Norin Mining, even though it's one of the branch companies. It is a subsidiary of Norinco, though. That is technically correct. Technically correct, but that difference needs to be made. So just to avoid the kind of confusion that we can have on that. Yes, it was an interesting project that China and Norin wants to acquire. They've put on the table $900 million as offer to the DRC government.

When they made their first offer last year in June, Jekamine came out and said to Shemaf they cannot sell the asset because two of the permits are still on Jekamine lease. Because it's Jekamine's own permit, but Shemaf was leasing them from Jekamine. And Jekamine said, as long as it's mine, you cannot sell them without my authorization. Which Shemaf said, basically, I got authorization from the minister of mine and the government where I can sell it. At the end, Jekamine just put his feet on the ground and said, you cannot move forward.

After a few months of discussion, this is where geopolitics also comes in into kind of understanding because we heard from D.C. and different people from Washington that the State Department at that time really also tried to kind of being behind Jekamint to encourage them to say, you know what, hold on to the asset. We don't want you to be good for us for you not to sell.

But the Jekabin on his own wanted to have the permit on for itself. Jekabin was searching for money, trying to find resources. They're still trying so far. They're still looking for resources to be able to start the operation themselves. But so far, they've been unsuccessful to secure funds from New York, from Washington, from London or from Switzerland, any matter. That's why Noreen came back again and said, you know what? I'm still going to put $900 million on the table, but your shares will go from 5% to 15%.

And we can still discuss different elements into this, you know, shareholding structure as long as we maintain majority shareholding in the project. That way, maybe you can find a way, we can find a way to acquire that. Given the current circumstances, given the fact that Jekamine is still struggling into finding the resources for that, given the whole political instability right in the DRC situation,

At the end, Noreen might have a good deal on the table to put on the table if they really want to move forward. Because on the other hand, there's no other funding coming for Jekamine. And the U.S., as you mentioned, 2016, the U.S., you know, big talks, a lot of promises. We want to do something. But when it comes to deliver to put the cash on the table, the cash is not following through. So that's why China is still there trying to acquire another key asset. A very interesting one. Not major, but a very interesting one, a promising one.

Well, $1.4 billion is still a pretty big asset. And let's talk about that name. JECA means that Giro is referring. That might be a name we're going to talk about quite a bit today. That, of course, is the state-owned mining company for the Democratic Republic of Congo that is partner to many, if not all, of the mining joint ventures in the Congo today.

This is a perfect transition that we're talking about the financing and the money on the table because we're now getting our first insights into how the Chinese are financing transition mineral deals around the world. There's a groundbreaking new report that came out from the research lab AidData at William and Mary College, and it's called Power Playbook, Beijing's Bid to Secure Overseas Transition Minerals. If this is a topic

that you're interested in, and I know there are a lot of you watching and listening to this that are interested in it, you are going to want to check out this report. It's a first-of-its-kind data set that systematically tracks China's official sector financial commitments for copper, cobalt, nickel, lithium,

and rare earths. It tracks both the extraction and the processing operations, again this is really impressive, across 165 low-income and middle-income countries over a 22-year period. Now that sounds impressive but this is the kind of work that AidData does and we are thrilled to have

two of the contributors on that report. Brooke Escobar is the interim director of the Chinese Development Finance Program at AidData, and also Catherine Welsh is a senior program manager on the Chinese Development Finance Program team as well. Both of them are joining us from beautiful Williamsburg, Virginia. A very good morning to you, and welcome to the program.

Thanks, Arik. Good morning. It's great to have you both here and to shed light on this amazing piece of research that you've done. Your research revealed that Chinese lenders of various kinds have provided $57 billion of aid and

and subsidized credit to various transition mineral projects in 19 Belt and Road countries. Brooke, let's first start with you to help us understand how did you pull this all together? What was the methodology to find this? Because again, this kind of report's never been done before. AidData has a long track record

in mapping out Chinese development finance. But I think in the context of the transition mineral sector and the critical resources sector, this has never been done before. Maybe you can just start our conversation about what you guys did, where were the sources, how did you find this information to be able to tell this story about how the Chinese are financing their critical resource operations abroad?

So we actually leveraged our existing data set, which this is one of the many sectors that we track in our existing global Chinese development finance data set. We track over 24 sectors. This is one of them. But we really wanted to understand exactly what China was doing in this particular sector. So we were able to leverage the data that we already had, the existing methodology that we already have, to really do a deep dive specifically in this sector and then

augment it with new information that's helping understand what are the mining sites that's going, that these financing are going to? How does China extend and what patterns or what playbook is it using in the transition mineral sector specifically? So we use a lot of primary sources. Catherine spent a lot of time, she's actually our data professional and was behind the methodology to build out exactly what are the new fields that we need to capture so that people can understand what is China doing in this sector? How is it different from the

the other flows that we see in the broad BRI financing scheme, and what are the effects that we find from Chinese official finance in this sector. Katherine, can you tell us a little bit about the sourcing that you use for this data so people can get a sense again of how reliable is it? Where did you get it from? What's the basis for all the conclusions that you came to?

So the data collection methodology that we use is available on our website. It's called Tracking Underreported Financial Flows. And we also have a methodology document related to this particular project as well. But as Brooke mentioned, this builds on our Global Chinese Development Finance data set, which is built with the Tracking Underreported Financial Flows methodology. We really prioritize going to the most reliable sources that we can find that report on Chinese state

backed financial flows channeled to countries all over the world. So this would involve sources from the Chinese government, Chinese state-owned companies that are involved in these transition mineral operations overseas, as well as reporting from recipient country governments. So if there's a mine in the Democratic Republic of Congo, we would look into the official source documentation available there as well and other organizations that are involved directly in these flows. And then we supplement that with other media sources. But the

core of our data set is built off these official sources from involved governments and companies. Looking into the data, because in your report, you went from 2000 to 2021, it was really fascinating the amount of data you were able to collect and to isolate out of your main data set. Did you get the same feeling that many used to have and still having when it talks about China engagement in the critical mineral space in Africa or in the world, saying that there was a

plan, a long-term planification behind that. The dates are telling you that when you look into the financing, you have the sense that, yes, it was something that they've planned, they've put an architecture behind and they walked into making that happen. Or it was just like at the end, after 21 years, you're like, jump,

Somehow it was random. Do you get that feeling it was much more planned, much more forward of randomness somehow? It's definitely planned, I would say. And what we found in the data is that China is very methodical and strategic and similar to what you talked about recently in the cobalt prices, how China thinks in decades, right? Not just in years. You definitely see that. And not only do they have the rhetoric from Xi Jinping, from other state officials saying that

this is a priority for China. But then you see that followed up by a network of financiers that are providing financing to transition mineral operations. But they're providing it in a specific way that's very different from how the rest of the official finance from China is extended. So, for example, it's extended specifically to Chinese official finance or sorry, Chinese state-owned firms that either have a stake already in a transition mineral operation, so at a mining site or a

processing site, or the official finance is providing the acquisition loan first, and then it provides a series of loans that actually support the development of that mine and the working capital needs of the firms. And so you see over time, there's definitely a specific shift to how can we acquire more mines? How do we support the existing mining operations? And in general, just increase those access to minerals over time.

Brook, allow me, I hope I'm not throwing a curveball on that because reading the report and it's also something because you've mentioned that it's really something interesting when you look into that space in terms of China acquisition. There's not much of a greenfield Chinese project in the mining sector in this part of the world.

It means that they are not acquiring new projects to do exploration and then operation. Most of them are brownfield project where they want to acquire, as you mentioned, they want to acquire a stake on an existing project or they want to start something that's already happening on the ground. Have you seen any sign of greenfield operation on financing? Like they start on ground zero where there's nothing, money goes on exploration and then it goes on moving. Yeah, I would say Peru and the DRC are the

top two destinations for these Chinese state flows for transition mineral operations. And an interesting piece of that story is Peru, where the top

Two mines that received financing during this 2000 to 2021 period are Toromocho and Las Bombas. I would say they're not building it from ground zero, but these are two greenfield mines. And actually, Toromocho is the first greenfield copper mine developed by a Chinese company overseas. And while the Aluminum Corporation of China, or Chinalco, acquired Toromocho,

This mine using its own capitals, this is an investment flow. It's not included in our loan data set. We find that Chinese state-owned banks then funneled billions of dollars over 10 loans over a span of many years to support the actual building of this mine and then the operations thereafter. And Las Bombas, the Chinese company got involved quite late, but in terms of the act

of that project. The financing that was provided, around $10 billion worth of loans related to the acquisition, covered the costs of the development of the mine that other companies had already kind of funneled into this project, other Swiss companies, Glencore and Extrata, from whom it was acquired. And then they funded

finished up the development and then launched this kind of greenfield copper mine in Peru. So I would say Peru is in particular an interesting example of Chinese companies getting involved at a quite an early stage of the project. And I would add that acquiring a brownfield project is also one strategy, right? To acquire into a mine that already has a more established production capacity, you know what the reserves are. So it's just a different type of strategy.

Girod, just clarify for everybody what the difference is between a greenfield investment and a brownfield investment. So a greenfield investment is basically when you start from ground zero. It means that you're going on somewhere and you say, I'm going to start with exploration. Exploration, I'm going to find deposits, reserve deposits, and then I'm going to start operation, mining operations.

Brownfield are the kind of project where someone has already done the groundwork. It's the kind of project where you minimize your own risk because exploration costs a lot of money and you may not find anything after that. So Brownfield, you go to someone, say, you know, I already have done the groundwork. There's this much of deposit, this much of reserve, and then I'm going to put money in there so we can move forward. So for Chinese, that was a kind of strategy allowing them to go to risky places like the DRC to be able to...

So, for example, when CIMOC took over the Tenkafungurume mine, that's a brownfield. Okay, so it seems that risk mitigation is a major priority for the Chinese. And when it comes to the financing of this, typically, Catherine, you've been talking a lot about the risk mitigation.

the lending and the loans, but that's a sensitive issue in many of these countries, given the debt sustainability problems that many countries in the Global South face. Some from Chinese loans, a lot from Euro debt and many other sources. So you said in the report that the Chinese are transitioning away from bilateral lending agreements to syndicated lending instruments. Can you explain what that shift is? And then also what is the difference between

a bilateral lending agreement like a loan and a syndicated lending agreement? Yeah, I can speak to that. So in particular, a bilateral loan is involving one creditor providing financing to one borrower. And then a syndicated loan is when multiple creditors are involved in providing financing to a borrower. So in this case, and I would say in terms of

these large-scale infrastructure projects that we see with these mines and also the acquisitions, which are quite costly. This is a way to pool resources across many different creditors to one project. And we also find, and we've spoken about this in the Belt and Road Reboot report in particular, that you can also find through a data that using syndicated loans involving non-Chinese creditors is also a way that they can outsource environmental, social, and governance risk

in terms of how they can manage these projects. - So can I just stop you right there? So when you're saying non-Chinese creditors, one of the things that we've been hearing from folks that say the Boston University Global Development Policy Center is that they're bringing on board banks like HSBC, Standard Chartered. Is that what you're talking about, is bringing on other financial partners even from the West?

In this particular sector, we've found that they've brought on other creditors, including from the West, not just creditors like HSBC. I think Brooke might be able to speak to this in a bit more detail. The syndicated lending, there's two types that we see in transition minerals from China, and one is syndicated lending with Chinese acquisitions.

Our Chinese state-backed funders together. And we really see a surge in this in the early BRI years around 2014 to 2017. And most of that money, where it's syndicated with only Chinese financiers, is going to Chinese firms and Chinese operations.

So that's really a way for the Chinese banks themselves to spread out the risk, right? And also, as Catherine mentioned in our previous report, we found that some of the policy banks for China had very low standards for enforcing environmental, social, and governance risks. But a lot of the state-owned Chinese banks actually have much higher standards. So when project review, the financing agreements, they just had naturally more stringent safeguards built in. And so by

syndicating with some of these other state-owned creditors, the lending itself has stronger safeguards and it's a way to de-risk the project overall. What we see in the final or the next four years of the BRI, so 2018 to 2021, is you see an increasing amount of the syndicated lending with

non-Chinese financiers. So again, as you're mentioning with Western banks, so China is putting its money together in a collaborative way to extend money to transition mineral operations. But one of the key differences here is that money is most often going to transition mineral operations that have no Chinese ownership. And

And so I would say those actually look much more like an investment where China is looking for a return on its investment and not necessarily part of its strategy to gain access to more transition mineral outputs.

Talking about ownership, Brooke, because in the report we see that in the data that the bulk of money are going to mining project where Chinese has a majority ownership. And we can see it's a kind of strategy where they want to make sure that it's going back home in that space. Can you tell us much more about the profile of those companies receiving the money of those Chinese lenders being state-owned or commercial lenders? Are we seeing a kind of connection in terms of profiling of those receiving the money and the lenders in those operations?

Yeah, so most often they're joint ventures. So it's a Chinese state-owned company that about 70% of the transition mineral financing goes towards an operation where the Chinese counterpart has majority ownership. And then a smaller portion, 10%,

is going to an operation where China has, or a Chinese firm has a minority. So it has less than 50%. But overall, 80% of Chinese financing is going to operations where they have at least significant majority ownership. So what we were able to find is it's most often going to state-owned operations, but there are a couple, or a small portion that's going to private Chinese companies with a stake in the transition mineral operation.

You know, Catherine, this week there was a report that came out on the Africa Report magazine, or maybe it was last week, where it said that Texas Republican Senator Ted Cruz met with African ambassadors in Washington. Not surprisingly, and again, just for background reference, Senator Cruz is now the chairman of the Senate Foreign Relations Subcommittee on Africa. So he kind of brought everybody together and said, we are still committed and engaged with Africa.

One of the points that he brought up, and this should come as no surprise to you, is that China engages in debt trap diplomacy. Those are his words. And I want to talk about whether or not the senator may be reading your report and saying, well, debt is being used to finance a lot of these projects. Should the borrower default on the debt, can the Chinese take the assets in lieu of payment?

Did your research on the financing validate any of the debt trap narratives that we've seen come out of the United States? And I want to be very clear here. ADATA, BU, Johns Hopkins, Chatham House have all done extensive research that have debunked the debt trap narrative. And so there is no verifiable evidence. But

I'm wondering if someone like Senator Cruz will look at your report and take inspiration from it based on if some of the defaults happen, what then becomes of the resources that the borrower owes to China?

In this particular case, I would say I'm not seeing evidence of that could be kind of used to support that kind of narrative. As Brooke mentioned, much of the financing is going to joint ventures or special purpose vehicles, which are majority or wholly Chinese. So in this particular case, there's a

a smaller portion of the portfolio that would even be considered public or publicly guaranteed debt in terms of the host government being on the hook for repaying that. So more so what we see is the host government reaps benefits in terms of, in some cases when it holds some equity in the project, but otherwise things like tax revenue and like social investment, like a

A portfolio for social investment projects that the company needs to maintain in the country, things like that. I would say the most controversial project that you'd see in the data set would be on Secomine, which has been the subject of much question around like the sovereign guarantee that was initially provided for a certain portion of the financing and later removed reportedly from the actual loans for the mining project itself. Yeah. Brooke, would you have anything else you would add to that?

I would add a couple things. One of the unique pieces of financing joint ventures or special purpose vehicles, which is, it's basically a limit, it's called a limited recourse project finance. And which means that if the project fails, if they cannot repay their loans, China cannot come in and just force the host government to pay back the loan. And it can seize assets from the actual project company, but not the mineral resources necessarily. The other thing that's really important about

The way that transition mineral financing is different from what we see in the other BRI financing is that a lot of these loans are actually guaranteed by Chinese companies. So usually in developing countries, you might have a sovereign guarantee, which means if it's a toll road, the project fails and can't repay, the sovereign government, the host government will come in and actually pay the loan back.

That's how it would normally work if it were to fail. But we actually see in this in the transition minerals space that the often the guarantee is coming from the Chinese company. So if there is a loan default or something like that, the host, usually it's like a parent company to the Chinese firm that has a stake in the operation. They would actually be on the hook to repay the loan. And so it wouldn't involve the host government at all.

And let me just give a little plug for another aid data report. We've been plugging a lot of aid data reports on the show today. But there is a fantastic report called How China Lends. And it really lays out in detail all of the mechanics of Chinese lending, touching on a lot of the things that Brooke talked about. Giro, we have a lot of concerns about Chinese mining in the DRC. Debt trap is not one of them. You know, when you hear Senator Cruz talk like this to the African ambassadors, what do you think?

I think it's just a natural follow-up of the rhetoric and discourse that we've been hearing in Washington for the last...

three years about Chinese engagement in Africa, especially in Yemen. Oh, it goes back more than three years, Sebo. It goes back a lot longer than three years. It's just a follow-up on that in a sense where there's not much of interest given to facts, to data, to what's really happening on the ground because the data is much more nuanced and much more complex, even debunking the political narrative. And people don't want the political narrative to be debunked because they need to serve certain purposes.

So for me, it's not really surprising. I would hear him talking. I was like, yeah, you're going to do that. You're going to say that. But for people like us following what's happening on the ground, knowing what's happening on the ground, we can tell you, nah, it's not exactly that. It's totally not what you're saying. It's completely not what you're saying. And this is in the case of minerals. And we've been hearing that a lot about minerals as well, that China is using minerals to like,

No, because when you look into minerals, Chinese loans in the mining operations, they are completely different. And at the end, as Brooke mentioned, basically it's the parent company coming up, which was on the hook into paying back. It's basically saying that those companies need to prove that the mining project is very valuable. It's commercial. It's really making sense for them to receive the loan from Chinese banks.

I'd like to pick up on where Giraud left off, that in the U.S., and I think it's also elsewhere as well, there's a difficulty in understanding the logic of how the Chinese are approaching this. And you wrote in the report, Beijing is following its own playbook rather than a set of rules and norms established

established by and for its Western competitors. And is that maybe part of the problem here is that at the end of the day, people in Washington, London, Brussels, New Delhi just don't understand the way the Chinese are approaching the critical mineral resource investment sector that they're going into? It's not that they don't understand, but they've chosen to build a different type of financing infrastructure than what China has chosen to build. And so the

Decades ago, the OECD countries came together. They all agreed to what's called a gentleman's agreement and said that we are not going to engage in kind of a race to the bottom to subsidize our own companies that have operations in other countries. You know, so there is for officially supported export credits is basically providing loans to companies in other countries and.

The OECD countries agreed not to provide cheap credit or subsidized credit. And instead, they're supposed to just let the market play out. And what we see in China is they've decided that doesn't make sense for us. They have a strategic need and want to open doors in developing countries for Chinese firms to be active and to get market share. And so what China does is provide subsidized credit or subsidized

export credits to its own firms that have operations in developing countries or want to have operations in developing countries. And so it provides a leg up for those Chinese firms to expand their operations in the developing world. And the other thing is that we also see, and we talked about this in the report, is there's

a diverse set of lenders on the China side, right? So you don't just have one or two official state-backed lenders that are active in providing credit to these Chinese firms. You see a lot. We track over 26 of...

state-backed lenders that are providing some form of financing, or there's one grant as well in the data set, to, again, provide that leg up. And it's money that is much cheaper than what the firm would be able to get on the private market. So it really is an advantage for Chinese firms. And Western countries have just decided not to do that. And also, they don't have the infrastructure in terms of this diverse set of network that's state-backed to provide the financing to their own firm.

So while Western companies or Western governments are not doing this, this model doesn't feel that exotic if you are sitting in the Emirates, for example, and the Emiratis seem to be pushing their state champions. The Turks seem to be pushing their state champions. Kazakhstan as well, correct me if I'm wrong, they're active in the DRC, pushing their state champions.

Do we see other maybe kind of middle power states following the Chinese model and using state-backed companies and state funds to promote their mineral interests in the global south? No, we have seen the Emirates, as you already mentioned, we've seen the Emirates trying to emulate what China is doing on the ground. And it's really something that's, when you think of it, it really makes sense, especially in a context of geopolitical competition and trying to gain access to natural resources and critical minerals. This is the question I wanted to ask Brooke.

bringing all of that in the context of the geopolitical competition that we have today. When you look into how Western governments really are putting policy out there, they're really encouraging private companies to go into countries like in the global south to try to invest in critical minerals. Companies saying we don't have the resources because the countries are risky, the jurisdictions are just murkier as you can imagine. And we don't have the

background, we don't have the support that we're going to need to compete with Chinese. Do you see in the future where what would be the tool for Western companies to be able now to exist in a competition where China is moving like this? Do they have to emulate or to also start to do like the Emirates are doing? Or do they stand a chance to remain the way they are and still win against Chinese companies?

You know, it's a bit of a reading of the tea leaves, but I do think that if Western companies want to compete, then they're going to need more access to credit and credit that is less expensive. Right. If you're competing on a bid and the other company is able to get more cash on hand at a cheaper price, right, than you are, then it's just going to be more difficult to compete.

especially not only in the short term, but especially in the long term. And, you know, if China is continuing this support on a consistent basis into the future, then I think Western governments really need to think about how critical is the access to these transition minerals and how much do they want to be dependent on a supply chain that's where China is in every piece of it rather than having its own domestic companies who have access to those.

I mean, the Western governments talk excessively about removing China from these supply chains, but yet when you ask that question of will they provide access to lower-cost capital to do this, the answer seems to be no. And the question is not whether or not the United States or Europe has the money. The money's there, it's just not being allocated for this purpose. So I guess, Catherine, in terms of wrapping up our discussion, looking forward, when you look at the trends, you looked at 22 years of financing.

When you look at the trends, what are we seeing going forward with the Chinese? Are they going to continue this pace, even as prices for some of these minerals and metals are very low? And do you see Western governments or even Japanese, Korean and other governments getting into the space to compete with the Chinese with this low cost capital and this low cost financing that Brooke talked about?

I would say we certainly see this trend continuing. And as we've mentioned in the report, it looks like they're ramping up financing for lithium mining and acquisitions in particular. In our data set, you can see one significant case in which Chinese state-owned banks provided financing for Tianqi Lithium to acquire a very significant stake in an SQM, which is one of the world's largest lithium producers based in Chile. And if you were to kind of move forward and

the timeline past 2021, we see additional financing. We've seen it in the news for mines in places like Mexico, lithium-ion battery production facility in Turkey, backed by Chinese banks. So certainly we see this trend in financing continuing and looking forward to updates to our data set as well to throw in additional more recent flows. And we are looking forward to those updates as well. The report is Power Playbook, Beijing's bid

to secure overseas transition minerals. If you are interested in how this race is unfolding, this is absolutely essential reading for all of you. And again, it brings the nuance that is often missing from the discussion about critical minerals that we see coming out of the US and Europe quite a bit. The team at AidData put it together and we were thrilled to have two of the contributors, Brooke Escobar, who's the interim director of the Chinese Development Finance Program at AidData,

and Catherine Walsh, a senior program manager also on the Chinese Development Finance Program teams. Thank you so much to both of you for taking the time this morning to join us and help explain this fascinating yet very complex topic. Thank you. Thanks so much.

Jiro, ADATA has done it again, where they've taken a topic in the mainstream conversation about what the Chinese are doing in the global south, whether it's on debt and this time on critical minerals, and added a level of complexity and nuance to it that really challenges the reductive, simple narratives that are out there about these issues. And ADATA's contribution to the conversation is absolutely invaluable. And if you haven't checked out their other work, cannot recommend it enough. But when it comes to this critical minerals report,

You are somebody who's been in this business for a very, very long time. You've been following what the Chinese are doing, not only in the DRC, but elsewhere in Africa, and then now increasingly elsewhere around the world. What did you learn from this report that you didn't know already?

First of all, for a nerd like me following those, it was really reading a report like that was really a real pleasure because you do find some gems. You do really find some very informative data. It's one thing to look into those topics from an outsider when you draw conclusions based on point one and B and trying to connect to say that, yeah, this is part of a larger plan. It's another thing to really have data numbers backing them up really well.

with details showing you that it started in 2020, 2021, and we're still continuing that happening. And again, it was really something that really, when you are someone who wants to be informed and know more and having the data, that reported something very,

very valuable. One other thing I've learned that was really interesting for me is the emergence, we didn't talk about that in the show, but we saw that the first part, we saw China Exim Bank and CBD, China Development Bank being the first one, the main contributors in terms of lending and financing. And over the years, we see now a change happening where we see commercial bank, ICBC, China Commercial Bank, China Industrial and Commercial Bank being now part of those syndicated loans and being part of the financing of those projects. It was really something high

opening and to see that you really have a whole apparatus a whole infrastructure to put in place to get where they want to go and it's really confirming the fact that where China is today is not just a fluke it's not something just happened it's just not something we open our eyes one day we realize oh there they know it's something that where many of us or if not all of us were not paying attention to that China was literally walking into making that happen and we see that today and

And on that topic of the syndicated loans, you know, it makes me laugh a little bit because over and over again, we hear this us versus them narrative out of the United States in particular on critical minerals. The Biden administration was tough on this. Certainly Trump in the first Trump, I imagine he'll be like this in the second Trump administration. We still don't know yet. But this idea that private companies invest

including Elon Musk's Tesla, do not align themselves with the interests of the US government. And so when we talk about this syndicated financing and you see international financial institutions, many coming from the West, are participating in a lot of this financing of Chinese critical minerals, it shows once again that the us versus them narrative of the West versus China on critical minerals and these strategic issues really starts to break down.

When I was in Singapore a couple of weeks ago, I talked to some folks from Trafigura, also some of the investment bankers there, and a lot of the syndicated financing is going through Singapore.

And Singapore is very much a part of the global West in some parts of it, some aspects of it. And it just makes me think that, again, this reductive attitude that we see coming out of out of Washington, people like Ted Cruz is just not really very productive. The other thing I want to point out, which I'm sure you were thinking of as well, is this is talking only about the extraction of these critical resources.

not about the processing of it. As far as I could see from the report, this was about extraction. So as long as you hear, and we're hearing Donald Trump talking about getting rare earths from Ukraine, I mean, that's his latest thing right now. As far as I know, and correct me if I'm wrong, the US and Europe really don't have very robust processing facilities to do anything with these raw materials should they get a hold of them one day.

Exactly. They don't. When you talk about rare earth, China process like 95% of heavy and light rare earth in the world. So it's really going to be interesting in the case of Trump and Ukraine and the rare earth to see where they're planning to build the processing and refining of those minerals. But in the report, talking about the report, and this is something I've noticed myself, when you look at the graphs, you realize that the bulk of the money are going to extraction operation.

really few very very little are going to processing or to advanced processing we don't see that the only place where we see that it's in the copper because the processing of copper is much more easier and that's what they've done in DRC Chile and elsewhere in Zambia but for the rest of

of the minerals. When you look into them, you're like, the bulk of the money are going to extraction. And this was one of the points that I've noticed. Was it going to extraction because there was no demand for it or because there was no incentive for the Chinese companies to do that? I think it's a mix of both. A mix of the fact that there was just

No demand, no strong demand for at that time in 2010, no one was talking about processing lithium in Zimbabwe. It was not a part of discussion. And DRC, it was part of the discussion because of copper. Yes, but elsewhere it was not the case. And later on, we see now there's the demand.

And that's what I'm expecting when they're going to have new data, maybe in five years from now, we're going to see that a border financing now going much more in certain aspect of processing that's starting to happen in certain part of the global south. But as we see, the bulk of the money is still going to extraction. And this is the part where it...

Huge effort needs to be made for money now to be invested in local processing and transformation on the ground. Well, that may start to happen first in Indonesia. One thing that you're going to start looking at is the new law that passed through the parliament last week that they're going to try and force more of the

I think it's the midstream processing in Indonesia and for that to occur domestically. This is very important because Indonesia in many respects on the policy side has been a leader that has set an example for other developing countries. So we're going to keep an eye on that. Just looking forward, we've got a number of very exciting projects that you're going to be working on here at China Global South Project. Maybe you could talk about your Cobalt data set. When can we expect to see an update?

that on the site? For the co-pilot to say it's expecting that we do have new funding allow us to have that but we are walking into having the data updated around mid-June or July. We're going to have new data for 2024 so we can update and so people can really see the new trend that's happening last year the changes of

CMOC, the confirmation now of CMOC, became the largest producer of cobalt. And in terms of other projects we are working on, we are working now into really mapping out Chinese presence in critical minerals in Africa. We're going to start by a few countries and from there we're going to be expanding to a larger spectrum to allow us to have a

why the perspective and a clear understanding of what China is doing in the critical mineral space in Africa. So this year is going to be really interesting for us because we're going to have a lot of product and output related to China and critical minerals in Africa. And in other parts of the world as well, we're in the process of hiring a transition minerals editor. We're also in the process of hiring a Latin American and Caribbean editor in Spanish. We're going to be launching a Spanish edition later this summer.

And we're launching a new fellows program where we're going to have scholars, journalists, analysts, and others from different parts of the Global South to contribute to the work that Jiho and the team are doing. So many exciting things happening at the China Global South project. If you'd like to check out the work that Jiho and the team are doing, go to chinaglobalsouth.com. And of course, if you'd like to support us and

We really, really need that support to do this amazing work, especially now that the China knowledge space is shrinking, getting more contested, getting smaller. And the independent fact-based agenda-free work that we do is even more important than ever. Go to chinaglobalsouth.com slash agenda.

subscribe. And if you are a teacher or a student of any kind, even high school students are subscribing to us. This is fantastic. Send me an email, eric at chinaglobalsouth.com, and I will send you the links for the half-off discounts. So that'll do it for Giraud and I. We will be back again next week with another edition of the China in Africa podcast. For Giraud in Mauritius, I'm Eric Olander. Thank you so much for listening and watching.

The discussion continues online. Follow the China Global South project on Blue Sky NX, a China GS project, or on YouTube at China Global South and share your thoughts on today's show or head over to our website at chinaglobalsouth.com where you can subscribe to receive full access to more than 5,000 articles and podcasts. Once again, that's chinaglobalsouth.com.

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