Knock-on effects in 2016

However, with a declining currency and capital outflows signaling lower confidence in the Asian powerhouse’s growth story, China’s own economic performance will continue to be monitored closely by the world in 2016 as policy efforts to stabilize the situation continue. A further fall in China’s currency could have a number of knock-on effects for the global economy, especially for Africa, such as eroding African economies’ relative export competitiveness by boosting that of China’s exports. It could also lessen the purchasing power of Chinese companies abroad and see possible further downward pressure on commodity prices, including oil.

But this needs to be weighed up against deflationary effects on the import side and the fact that most commercial transactions between China and the continent, despite the signing of some currency swap agreements, remain dollar-denominated (although the U.S. dollar strengthened substantially against various African currencies).

Undoubtedly though, the changing structure of China’s economy and the resultant growth trajectory will continue to be a hot topic in global economics. It will not only test China’s commercial engagements with other leading commercial powers but with Africa too.

Given these developments, the likely maturing and shifting nature of this relationship should be embraced by African policymakers by implementing reforms that will enhance domestic productivity and economic diversification, away from an over-reliance on resource exports, through emphasizing industrial cooperation with China and other partners. For countries that play their policy cards appropriately, the next few years could be a game changer for their own economic development.

(The author is associate director at Frontier Advisory Deloitte. The opinions expressed in this article are those of the author and do not necessarily reflect those of Deloitte.)