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AfricaMoney | June 26, 2017

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Two sides to coin: Recent slowdown in China poses both opportunities & threats for Africa

Two sides to coin: Recent slowdown in China poses both opportunities & threats for Africa

Given the recent slowdown in China, the Chinese might stop buying African minerals that make up over 75% of African exports to China; but, on the positive side, this could spell good news since lower returns on investment in China may encourage the government to strengthen its investment abroad, and Africa would seem like the obvious place.(Image:atta.travel)

It is estimated that there are currently over one million Chinese in Sub-Saharan Africa, many of whom are working on Chinese financed projects such as railways and roads.

Basis such widespread projects in the region, the trade relationship between China and Sub-Saharan Africa has grown significantly, with trade between the two parties valued at USD 222billion last year, up from around USD 10 billion at the start of the millennium.

While fears of extraction and exploitation of the African continent may abound, Africa has certainly benefited in many ways from the Chinese involvement. Every year, as China has experienced growth, the Afro-Chinese trade partnership has become stronger and stronger.

This had led to the African continent placing overt reliance on the Chinese. While the EU and USA are investing in the continent, it is no way near the levels the are Chinese putting in.

Traveling around Eastern and Southern Africa, it can be seen that at least 3 in 4 infrastructure projects are financed by Asian investors. While riding the wave, this certainly isn’t a problem, however, the recent slowdown in China may cause grave concern to some African Presidents.

If the Chinese stop buying African minerals that currently makes up over 75% of African exports to China, there will undoubtedly be less investment the other way.

However, on the other hand, there is the possibility that more blue collar workers will have to leave China to find work, and with a huge amount still to do, Africa could be the place.

China’s growth for 2014 was the weakest in a quarter of a century, something that has raised many eyebrows. However, what will the effect be on its import levels and relationship with Africa?

The good news is that the economy is actually becoming better balanced. Consumption is becoming a larger proportion of the GDP and, that, combined with a growing middle class, could spell good news for African mineral exports.

If there is less investment inside China, the government may look to further strengthen their investment abroad, and Africa would seem like the obvious place. Although there is concern that Chinese investment has drawbacks due to the use of Chinese workers who are often segregated from African settlements, the continent will only benefit from the new and improved infrastructure.

Africa still has its problems but Chinese aid and investment is most certainly helping in overcoming the continent’s issues. Although China is experiencing diminished growth for the first time in a generation, it will hopefully not affect its involvement in Africa.After all, it is still above 7%, which, in a developed economy, would appear outstanding.

Assuming the rate of growth for Chinese GDP continues to balance out, away from the levels we have seen in the past, there may be cause for concern in the future as the Chinese government have to put the reins on investment.

However, for the time being, China will continue to benefit Africa in terms of exports and foreign investment, and will hopefully allow the continent to continue its path of development.

Source: themarketmogul.com

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