This Fund does not serve

Of the two: either China profoundly changes the rules of operation of the Cooperation Fund or it is better to create a new one, adapted to the characteristics of PSC companies. 

MB May 2020 Special Report | Forum Macau: 17 years, old enough?  


The agenda for the next ministerial meeting of the Forum, whether in June or later, is not known but the theme of the Development Cooperation Fund between China and Portuguese-speaking Countries is almost certain to be at the top. 

The representatives of the various member countries insist that it be so, and even the secretary general recognizes that it is necessary to change the way the Fund works. 

Launched in 2010 by the then Prime-Minister Wen Jiabao and activated in 2013, the Fund, with a base of US$1 billion, had supported only three projects by the end of the first half of 2019 (Macau Business requested an update of the numbers, without success; lack of information is, moreover, one of the characteristics associated with this financial mechanism). 

In the beginning, when the various delegates realized that the Fund had no action, they suggested moving the headquarters from Beijing to Macau, thinking that it was the distance that inhibited the ability to respond. China relented and the Fund now has operational officials in the MSAR. 

But the main problem has not changed. 

It was then that it was realized that the problem was structural and more complex to solve. 

The China Development Bank, which is at the origin of this and other funds created by China to foster international cooperation, designed the fund as a risk capital instrument, with the internationally recognized characteristics of this type of venture capital: entry into the capital of companies, with a minority interest, and exit date less than 10 years, with return on invested capital and a pre-established rate of return. 

If this mechanism can help finance companies with large capacity and forecast high profits in a short period of time, these are not the companies linked to PSCs that are potentially interested. 

And even if there are some companies with this profile in Brazil, Portugal or even Angola, the same will not happen in other Forum member countries, whose companies want another approach. 

Several potential stakeholders, linked to small and medium-sized companies, gave up when they realized the difficulty of complying with the rules required by the Fund. 

And the problems associated with the Fund do not stop there. 

If the Forum, despite its 17 years, remains unknown to most of the entrepreneurs, namely in Brazil and in the African countries that speak Portuguese, the Fund is even less known. 

Finally, to all of these difficulties can be added one more: besides the bureaucratic reasons, China has become a lot more cautious in recent years about what projects are funded and therefore more selective and taking more time to approve new projects. 

“We will pass on these comments to the fund’s managers and we will try to improve the link between the fund and the business sector. Participants [at the 13th regular meeting of the Permanent Secretariat] stated that we need to be more connected to the business sector and I am in complete agreement,” said Xu Yingzhen, secretary general, in 2018. 

There is an expectation that, two years later, these criticisms have been absorbed. 



“If the next ministerial meeting does not take concrete measures to address the problem, the Fund will continue to be merely a political banner with little practical utility” – Francisco Leandro 

Four areas “that need urgent intervention” 

“The challenges of the Fund arise from the fact that is has not yet been designed as an instrument for structural development,” stated Professor Francisco Leandro to Macau Business. 

Mr Leandro listed four areas “that need urgent intervention”: 

(1) The sustainability of the fund and its returns should be diversified, and it should allow for a long-term evolution (different phases), according to the developing interests of China and the PSC; 

(2) Initially, the returns of the fund should not be based on a rigorously commercial investment (in which the projects evaluation is based on a commercial profitability), but the fund should make available different types of liquidity returns. The fund as a whole, must have different types of capital – private, private and public and public; 

(3) The diversification of the fund should advance different types of credit to stand as a real instrument to support the SME and to encourage corporate partnerships; 

(4) The fund should receive the participation of all PSC, in a proportional manner, in terms of liquidity and management – following the BRICS development bank model. 

“If the next ministerial meeting does not take concrete measures to address the problem, the Fund will continue to be merely a political banner with little practical utility,” concludes the Associate Professor and Assistant Dean, Institute for Research on Portuguese Speaking Countries, City University of Macau.