China Deal Gives Zimbabwe £700m Boost

China today threw Zimbabwe's disintegrating economy a lifeline with energy and mining deals worth £700m.

The largest deal will see China set up coal mines and build three coal-fired thermal power stations, providing relief for the state power company which cuts power for seven hours a day to factories, businesses and homes.

Neither China nor Zimbabwe indicated how the investment would be repaid, but the deal will give Beijing access to Zimbabwe's wide variety of precious minerals, including the world's second largest deposits of platinum as well as gold, chrome, coal, nickel and diamonds.

As the deal was announced in Harare, China continued to ramp up its role as a global player by hosting a summit of states encompassing almost half the world's population and some of Washington's most prominent opponents.

The Chinese president, Hu Jintao, said the Shanghai Cooperation Organisation - which brought together the leaders of 10 nations in and around central Asia - is designed to promote peace and stability in a region that has become an increasingly important source of oil and gas.

But the group's potential role as a counterweight to the US was underlined by the presence of the Iranian president, Mahmoud Ahmadinejad, who received a warm welcome in Shanghai despite his country's standoff with international nuclear inspectors over Tehran's uranium enrichment programme.

The countries gathered in Shanghai control almost a quarter of the world's oil supplies and are building a series of pipelines across the region. A pipeline is being planned from Iran to China that would cross Pakistan, whose president, Pervez Musharraf, yesterday requested to be admitted as a full member of the SCO.

In Zimbabwe's rapidly devaluing currency the new Chinese deals are worth Z$143 trillion (£700m) at the official rate of exchange or Z$310 trillion at the more realistic parallel (black market) exchange rate.

The Chinese firm China Machine Building International has built thermal power plants in Nigeria and Sudan and has been involved in mining ventures in Gabon.

"It is a welcome investment for the Mugabe government but it will only begin to produce much-needed electrical power in several years time," said Harare economist John Robertson. "Until then we will remain in the dark."

Another agreement will see a joint venture between Zimbabwe's state mining development corporation and China's Star Communications to mine chrome, with funding from the China Development Bank.

Zimbabwe also plans to import Chinese equipment for telecommunications, road-building, irrigation and farming. Robert Mugabe's government already relies on China for imports of aircraft and weapons that it can no longer buy from western countries because of international embargoes. Last year Zimbabwe bought three passenger planes, six military trainer jets and nearly 400 commuter buses from China.

Thirsty for oil and raw materials, China has invested billions into resource-rich African countries. China's trade with Africa jumped by 39% to $32.17bn (£17bn) in the first 10 months of last year, according to official Chinese trade statistics. Analysts said the surge was fuelled by China's increased imports of African oil.

Africa is also buying almost as much in Chinese-made goods, the figures show. Highlighting China's dramatic economic expansion into Africa, the Chinese premier, Wen Jiabao, embarks today on a tour of seven African nations - Egypt, Ghana, the Democratic Republic of Congo, Angola, South Africa, Tanzania and Uganda.