China-africa Economic Ties Deepen Amid Pandemic

Geopolitical shifts have been seen around the world amid the protracted disruption caused by COVID-19. Many markets are facing unprecedented economic decline, and political tensions have risen between countries as disagreements around how to approach the pandemic persist.

China-africa relations, however, have strengthened during this period, with China aiding Africa on several fronts to deal with the pandemic. The continued atmosphere of solidarity between Africa and China will mean a deepening of strategic relations as the world moves into a “new normal”.

China was one of the first countries to contain the virus to a certain extent early in the year. While the country’s GDP fell by 6.8 percent in the first quarter, a strong rebound in the second and third quarters placed China in a position to send aid to its strategic allies in Africa in an effort to minimize the impact of the virus.

Medical assistance was the first measure taken by both the Chinese Government and private enterprises to support Africa. Testing kits, masks, gloves, and other supplies were donated to countries across the African continent. Medical teams were also sent to countries such as Zimbabwe and Algeria. In late October, China invited ambassadors and diplomats from 50 African countries to pay a visit to China’s largest vaccine maker, Sinopharm. During this visit, Liu Jingzhen, Chairman of Sinopharm, said that once the vaccine is developed, African countries would benefit significantly from it.

While the nature of the virus and the measures to prevent its spread are now clearer, addressing the economic fallout seen in its wake remains a challenge across Africa. The World Bank is predicting a 3.3 percent decline in GDP in Subsaharan Africa. This will mark the region’s first recession in 25 years, with fears that the pandemic will push a further 40 million people into poverty.

As Africa’s largest single-state creditor, the area of debt relief was identified as one in which China could ease economic pressures on African economies. At a meeting of G20 members, China announced the suspension of both principal and interest payments on debts until the end of this year, with 40 African countries eligible for this debt relief.

While these efforts will not entirely save these economies, they will aid recovery efforts.

Sino-african economic relations are expected to further deepen as this tumultuous year comes to an end. Chinese aid to the African continent in the form of medical assistance, as well as the debt relief measures will play a major role in helping the continent recover post-pandemic and increasing bilateral trade will be paramount to ensuring more sustainable economic recovery.

The world is facing unprecedented economic downturns amid lockdowns and other restrictive measures implemented due to COVID-19. However, while the previous growth projections will not be met, China is the only G20 country that is expected to experience growth in 2020. While China experienced its first GDP decline in decades in the first quarter of 2020 with a 6.8 percent contraction, it returned to positive territory with a 3.2 percent expansion in Q2, followed by 4.9 percent in Q3. Other major economies have not fared as well, with the G20 nations’ combined decline coming in at 9.1 percent.

Key Economic Indicators

The consumer price index (CPI) rose by 0.5 percent year on year (y-o-y) in October 2020, a decrease from September’s 1.7 percent. The producer price index (PPI) fell by 2.1 percent y-o-y, unchanged from September’s figure. China’s CPI rose at its slowest pace in 11 years; however, pork price was down for the first time in 20 months. Pork price decreased by 2.8 percent, a significant drop from September when it rose by 25.5 percent.

PMI Expands for 8th Month

China’s official purchasing manager’s index (PMI) rose by 51.4 points, following the 51.5 reading in September. While the index is at a lower level than in September, it marks the 8th consecutive month of expansion (a reading above 50 represents expansion).

The new orders index remained unchanged from September with a reading of 52.8 percent, indicating a stable manufacturing activity.

Third CIIE Held Successfully

China successfully hosted the Third China International Import Expo (CIIE) over six days from November 5 to 10 in Shanghai. Deals worth $72.62 billion were signed at this year’s expo, an increase of 2.1 percent year on year.

While many markets are struggling to host large scale events, China has been able to do so through months of effective measures to curb the spread of the coronavirus within its borders. Shortly after the CIIE, Shanghai was host to another major event, the Food and Hospitality – Prowine Trade Fair, held from November 10 to 12. CA

Easing Consumer Inflation

China’s consumer inflation eased for a third straight month and hit an 11-year low in October as food prices tumbled, official data showed on November 10.

The consumer price index (CPI), a main gauge of inflation, rose 0.5 percent year on year in October, narrowing from the 1.7-percent rise in September, according to data from the National Bureau of Statistics (NBS).

On a monthly basis, consumer prices dropped 0.3 percent. Food prices, which account for nearly one-third of China’s CPI, went down 1.8 percent last month.

Dong Lijuan, a senior statistician with the NBS, attributed the low inflation to the drop in food prices, especially eggs, vegetables and pork.

RCEP Promotes Greater Openness

The Regional Comprehensive Economic Partnership (RCEP) agreement was signed by its 15 participating countries on November 15, launching the world’s biggest free trade bloc. Participating countries include the 10 members of the Association of Southeast Asian Nations and China, Japan, South Korea, Australia and New Zealand.

The RCEP agreement will accelerate the building of the ASEAN economic community and thereby allow ASEAN to become dynamic and strong partners in promoting cooperation for shared prosperity, Vietnamese Prime Minister Nguyen Xuan Phuc said at the signing ceremony held via video conference.

The 15 participating countries of the RCEP account for around 30 percent of the global population, global gross domestic product and global trade.

Foreign Trade Innovation

The guideline on the innovative development of foreign trade released in November by the State Council focuses on looking for new ways to explore the international market, optimizing the domestic layout of foreign trade, and enhancing the competitiveness of firms engaged in foreign trade.

It also specifies measures to improve the structure of exports and imports, develop various types of innovative trade, and foster platforms to promote foreign trade.

Ren Hongbin, Assistant Minister of Commerce, said at a press briefing on November 13 that these measures will offer foreign enterprises more policy dividends, sound business environment, more market space and development opportunities.

Promoting Service Consumption

China will work on new measures to promote service consumption, further unleashing consumption potential in the service sector, according to the National Development and Reform Commission (NDRC) on November 17.

0.3%

The COVID-19 epidemic has created opportunities for certain new services, including online healthcare, intelligent sports, and online education, said the NDRC spokesperson Meng Wei at a press conference.

The country will cultivate new consumption demonstration cities, deepen the reform of deregulation, and accelerate the establishment of an oversight system that meets the requirements of the healthy development of modern consumption, said another NDRC official.

Accelerating FAI Growth

China’s fixed-asset investment (FAI) will resume the upward momentum in 2021, with strong infrastructure FAI underpinning its growth at the beginning of the year, Fitch Ratings said in a report.

The country’s FAI growth is likely to accelerate in the fourth quarter of this year, leading to a mild increase for the whole year, the rating agency said, noting that such a trend suggests that FAI growth will remain stable in 2021.

China’s FAI went up by 0.8 percent year on year in the first three quarters, the first gain in 2020, data from the National Bureau of Statistics showed.

During the nine-month period, infrastructure FAI recovery was weaker than expected, the report said, adding that the slower growth was partly attributed to the longer-than-expected approval process and project commencement delays due to a prolonged rainy season in July.

The country’s full-year FAI growth in 2021 may be constrained by the special bond quota, which is yet to be announced, it added. CA