Heading straight into the unknown requires boldness and the courage to be met by uncertainty. This requires a certain level of guts and former…
Any economic news out of China makes waves in markets around the world, particularly when it’s bad. Last year’s slowdown prompted furrowed brows across the globe. Reports in December 2015 that the People’s Bank of China was using an aggressive expansionary policy to buffer lethargic growth indicated that China’s problems would persist well into the new year.
Because China is a leading investor in African markets, many analysts speculated that the shift would negatively impact the continent. The International Monetary Fund even downgraded sub-Saharan Africa’s growth forecast on the basis of China’s circumstances.
But Africa won’t suffer over China’s economic situation. In fact, African markets’ long-term outlook is quite positive because they stand to benefit handsomely from China’s attempts to accelerate growth and improve financial security. China established itself as Africa’s primary trade partner in the past several years, with trade volumes that reached nearly US$200-billion and inroads into some of the region’s most promising markets.
While it’s unclear what exactly Chinese investment will look like in the next year or so, it is certain that Africa will gain from the circumstances. The following are three key benefits Africa will enjoy in its relationship with China in the near future:
1. New Opportunities for Agricultural Exports
Slowed imports in China allow African leaders chances to diversify their export deals throughout Southeast Asia, particularly with their agricultural products. This would increase trade revenue and mitigate the fallout from shifting demands among key export markets. The Chinese government decreased imports of African agricultural products during the past decade, but that may change as the country’s urban population climbs to one billion by 2030.
Urbanisation in China is radically reducing farm labor, while pollution and environmental degradation are having adverse effects on the foodstuffs produced. African economies with strong agricultural bases can exploit these circumstances to become leading exporters as China’s dependency on foreign food grows.
2. Increased Leverage in Exports to China
Critics blame China’s lackluster export-driven growth on underperformance in vital export destinations, arguing that these arrangements decelerated economic momentum. Now the government wants to stimulate domestic consumption by lowering tariffs on select import goods, which could be great news for its African trade partners. China already saw some improvement in consumption numbers, which increased from 48.2% of growth in 2013 to 51.2% in 2014, and it will continue to push for more growth in this area.
With domestic buying patterns on the rise, African economies can prioritise deeper penetration into China’s export markets and create new avenues for investors. This would be a momentum-building endeavour in many ways because trade between China and sub-Saharan Africa hit near US$300-billion recently. Exports to China composed 15% of the region’s export deals as of 2012, so this already established economic relationship has room to grow as China’s economy reconfigures itself.
3. Long-term emphasis on Africa
The opportunities in Kenya, Ethiopia, and other exciting African economies are not lost on China, even during a crisis. Experts say that despite its recent economic troubles, China will still emphasise Africa in its investment portfolio. Countries such as the US, France, Germany, India, the United Arab Emirates, and others will also continue investing in African markets and will likely ramp up their activities.
China’s long-standing interest in Africa signaled the opportunities there to the rest of the world. It won’t back off its investments in any significant way, and Africa can only benefit as China’s economic troubles work themselves out. Africa is poised to become a prime export partner for countries throughout Asia, and China is going to make sure it stays competitive as that happens.