Chinese investors weigh risks after Kabul hotel attack

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By Charlotte Greenfield and Mohammad Yunus Yawar

KABUL (Reuters) - In one of the office towers of Kabul's China Town, entrepreneur Yu Minghui sat gauging the aftershocks of the militant attack that severely wounded five of his compatriots in a city centre hotel.

Armed men opened fire in the Longan Hotel on Monday, part of what analysts said appeared to be a trend of attacks aimed at scaring off any foreign investors or partners interested in working with Afghanistan's Taliban-led government.

Three days on, Yu said he, for one, was determined to stay and keep building his manufacturing plant outside the Afghan capital.

But other potential Chinese investors were less sure.

Most investors had decided to head home ahead of Chinese New Year, said Yu. "I think maybe 80% will not return."

The assault on the Longan - a hotel that had served a wave of visiting Chinese businessmen since the Taliban took over the country - came less than two weeks after an attack on Pakistan's embassy in Kabul. In September, a suicide bomber hit Russia's mission.

All three were claimed by one of the Taliban's main rivals, Islamic State.

"The idea is to push potential partners - the few the Taliban can count on - away from the Taliban," said Michael Kugelman, director of the South Asia Institute at the Washington D.C.-based Wilson Center.

GUNFIRE, PANIC

News of the hotel attack spread fast to the investors running China Town - a cluster of 10-storey blocks about 20 minutes drive away, overlooked by snow-topped mountains.

After security forces secured the hotel, Yu got through to some of the guests by phone.

They told him how they had barricaded themselves into rooms as they heard the sound of continuous gunfire. Several climbed out windows and one woman panicked and fell several storeys, suffering serious injuries. Another got shot in the torso, Yu said.

In all, about 35 Chinese investors were in the hotel, he said - about a third of the number he estimated were in Afghanistan at the time.

That was all bound to have an impact.

Yu said around 500 Chinese businessmen had entered Afghanistan since the Taliban took over in 2021 to study business opportunities, though few had yet committed to investment.

Yu and other Afghan businessmen who work with international investors and asked to remain anonymous said many were now having second thoughts.

"If security is good, investment will be good. If security is average, investment will be average. If security is bad, investment will be bad," said Yu, who also heads the China-Afghanistan Trade Committee and founded the China Town development.

Afghanistan's commerce ministry told Reuters more than 100 foreign companies had registered in the past year, many of them Chinese, compared with around 30 per year previously.

The attacks have increased pressure on the Taliban-run administration as it works to stabilise an economy hit by banking sanctions and a cut in development aid.

Beijing has not formally recognised the administration. But China still has significant strategic interests in its neighbour which sits in the centre of a region important to its Belt and Road infrastructure initiative.

State-owned China Metallurgical Group Corporation (MCC) has been in talks with the Taliban-run administration over a $3 billion deal to run a copper mine in eastern Logar province, mining officials say. A contract for the project was signed 2007 under the previous foreign-backed government, but it then faced lengthy delays.

They are talks that the Taliban are keen to keep going.

"Yes, there are some groups that want and try to destroy the relationship of the Islamic Emirate with other countries, but we will not allow such thing happen," said Bilal Karimi, deputy spokesperson for the Taliban-run administration.

"We have good relationship with MCC and other Chinese companies, also we invite them to continue their activities in our country."