ANALYSIS - China tries to wean Africa investors off state loans

By Lucy Hornby

BEIJING (Reuters) - Chinese investors in Africa, long used to low-interest policy loans, are being reluctantly pushed towards commercial lending as Chinese investment in the continent outpaces Beijing's willingness to take on risk.

Investors are unenthusiastic about the change, which generally means more scrutiny over each project. In turn they also want more guarantees from African governments before committing to projects, bankers and executives told Reuters.

Chinese Premier Wen Jiabao meets African leaders in Egypt this weekend, with investment and aid projects high on the agenda.

Chinese projects in Africa have traditionally been negotiated with the Beijing government's help, and funded with loans on preferential terms from state-owned banks that support government policy objectives. But private firms have poured into Africa in recent years, and even state-owned firms have exceeded the willingness of policy banks to lend.

"In the past, if the Export-Import Bank didn't support a project, there were no options," said Xing Houyuan, a director with the Chinese Academy of International Trade and Economic Cooperation, under the Ministry of Commerce, referring to one of the main providers of investment and trade credit financing.

"Now many more companies are interested in investing in Africa, and Ex-Im Bank can't possibly service them all. Africa is better now, so the risk is less. Foreign reserves have stabilised, and the investment environment is better."

China's direct investment in Africa, excluding the financial sector, rose 79 percent to $875 million in the first half of 2009, as Chinese companies built roads, ports, railroads, apartment blocks, mines and oil pipelines.

Total Chinese investment in Africa reached $26 billion by the end of 2008, according to Chinese figures.