Chinese get fingers burned amid Sudan economic crisis

Partners have become unreliable since Khartoum lost oil-rich south, cutting off source of foreign exchange and government revenue

PUBLISHED : Monday, 15 July, 2013, 12:00am
UPDATED : Tuesday, 16 July, 2013, 5:41am

When Chinese clothing wholesaler Chan Cuixiao signed a deal with a Sudanese businessman to export colourful bed sheets to the African country, he was confident of making good money.

A few months later he is in serious financial trouble. He shipped his goods to Sudan but did not get paid and has rushed to the country to try to track down his local business partner.

I made a loss of US$200,000 but have been unable to find the Sudanese guy. The phone number and address he gave me seem wrong
Clothing wholesaler Chan Cuixiao

The Sudanese had sent him credit and bank financing letters and as Chan had done business that way in Egypt and other Arab countries, he thought it was safe to export his goods.

"I made a loss of US$200,000 but have been unable to find the Sudanese guy. The phone number and address he gave me seem wrong," Chan said in a clothing store run by a compatriot in Omdurman, north of Khartoum.

Chan is not alone in losing money. At least 10 Chinese clothing wholesalers in Omdurman's fashion market say they have not been paid by Sudanese partners.

Others are filing legal suits, but a weak legal system means they stand little chance of getting their money back, analysts say.

Sudan has been scrambling to contain an economic crisis since it lost the bulk of its oil production when South Sudan seceded in 2011. As oil was the main source of budget income and foreign exchange reserves needed to pay for imports, many Sudanese importers are now struggling to get their hands on dollars to pay foreign suppliers. China is Sudan's main trading partner and lifeline as Western firms have shunned the country since a US trade embargo was imposed in 1997 over its human rights record. It bans firms operating in the US from doing business with Sudan.

Chinese firms, undeterred by conflicts, corruption and galloping inflation, are building transport and telecommunications infrastructure and supply the country with consumer staples.

But for many private Chinese entrepreneurs, most of whom came after the end of Sudan's civil war in 2005, Sudan's depleted finances are creating a difficult business environment.

"We hardly have any projects in Sudan anymore and are now moving staff to Kenya where business is much better," the head of a mid-sized private Chinese building company said.

He asked not to be named as he fears problems with the Sudanese government, which still owes his company money for work for ministries in Khartoum during the past two years.

China has an interest in Sudan ending its economic crisis as it has investments in South Sudan's oil production, which has to be exported through Sudan.

Sudan resumed oil exports last month - after a 16-month shutdown due to a row with South Sudan over pipeline fees - with the sale of a cargo of oil produced by China National Petroleum Corp, which dominates the oil industry in both countries.

Sudan's state airport operator has just won a US$700 million loan from China's state-run Export Import Bank to build a new airport in Khartoum, one of the largest industrial projects in the country in recent years.

Still, bilateral trade has been falling. It totalled US$11.5 billion in 2011 but just $3.3 billion in the January-November period of 2012, Chinese figures show.

Hoteliers in Khartoum are also feeling the impact from a drop in Chinese and other Asian business travellers.

"We used to have an occupancy rate of much more than 50 per cent," said Liu Suiqin, owner of a hotel near the former UN headquarters in Khartoum, who came to Sudan 13 years ago from Beijing.

"Now it's 20 or 30 per cent and prices for a single room have halved to around US$40.

"Maybe we'll wait one or two years. If things don't improve we'll go back to Beijing," she said.