Gloomy global economic outlook won’t affect China-Nigeria business – Envoy
The Chinese economy is deeply integrated into the global market. Given the weak growth of the global economy, China can’t stand unaffected. In this regard, what’s your opinion on the cooperation between China and African countries, especially with Nigeria? Do you think the cooperation will be affected by the gloomy outlook?
I don’t think so. Looking at the whole picture, I don’t want to say bleak. In the past decades, China-Africa relations have kept a good momentum of overall development, with growing political mutual trust and frequent high-level exchanges, roaring fruitful economical cooperation and deepening mutual understanding between Chinese and African people. In 2014, the trade volume between China and Africa reached 221.8 billion. For six years in a row, China has been Africa’s largest trade partner. China’s FDI in Africa has grown from zero to 28.5 billion, creating tangible benefits to both Chinese and African peoples.
Nigeria is the largest engineering contracting market, the second largest export market, the third largest trade partner and major investment destination of China in Africa. The cooperation between China and Nigeria has developed smoothly and scored impressive achievements in recent years. China and Nigeria are both the biggest economies and have the biggest populations in their respective regions. We have taken note that the new Nigerian government is planning to develop the infrastructure, power industry, manufacturing sector, agriculture and textile and to tap the potentials of mineral resources. These are some of the areas that precisely China is well-equipped, because we have got such expertise, financing, technology and management, which are all needed by the Nigerian side. In this sense, China and Nigeria are highly complementary, and the cooperation between the two countries would be full of great potential and embrace a bright future.
Indeed China’s economy is facing some temporary difficulties now, but the development prospect is still bright. China has the willingness and capability to further expand the cooperation with African countries. As you know, Chinese Premier Li Keqiang has highlighted the importance of production capacity cooperation between countries at different stages of development in his special address at the Ninth Summer Davos Forum. I completely agree with him and think the production capacity cooperation is the best approach of cooperation between China and African countries.
There is this talk about a slow-down in China’s economy and fear it is heading for a hard landing. What’s your assessment of the situation?
Actually in the first half of the year 2015, China’s gross domestic product managed to grow by the central government’s set target of 7 per cent year-on-year, which is consistent with the expectation of the whole year, and is still among the highest of the world’s major economies. In particular, we are talking about a $10 trillion economy, for which 7% growth actually generates more increase in volume than the double-digit growth in the past.
Despite this slowing down, the fundamentals of the economy are stable. The other key economic indicators in the first half of this year, including employment, income of residents, margin of price rise and scale of foreign trade, are mostly stable and show that there has been overall stability in China’s economic development, despite certain moderation in speed. For example, the surveyed urban unemployment rate is around 5.1 per cent and more than seven million urban jobs have been newly created. What is more encouraging is that China’s economic structure is rapidly improving. Today, the services sector already accounts for half of China’s GDP, and consumption contributes 60 per cent to growth. Growth in high-tech industries is over 10 per cent, which is notably higher than the entire industrial sector. Consumer demands for information, cultural, health and tourism products are booming. Energy conservation, environmental protection and the green economy are thriving. New economic growth areas are rapidly taking shape.
When the Chinese currency was recently devalued, the argument was that its main purpose was to boost exports, and there was fear it might trigger a chain reaction. Some are even worried about a currency war. Is this a correct perception?
It’s not correct. It’s a confusion with facts, and people have different interpretations. The RMB in the last couple of years has appreciated by 15 per cent. So we’re at a new normal level of the Chinese economy, which means it is undergoing transformation and upper-grading. It’s not resource or investment-driven, but more consumption-driven. So we’re tapping into our internal market to ensure it’s more balanced.
As many currencies significantly depreciated against the dollar recently, developments on the international markets compelled China to adjust the quotation regime of the RMB central parity. Yet it was a small adjustment. Now the RMB exchange rate is basically stable. There is no basis for continued depreciation of the RMB, because China’s economy has been operating within the proper range. China has ample foreign exchange reserves and surplus of trade in goods, which separately stand at 3557.4 billion US dollars and 368 billion yuan by the end of August. All these show that the RMB exchange rate can stay basically stable at an adaptive and equilibrium level.
It is no need for China to boost exports by devaluing the RMB. This is not in keeping with China’s policy of structural adjustment. Still less does China want to see a global currency war. As the Chinese economy has become so highly integrated into the global economy, a currency war would only bring more harm than good to China.
Being in the AU and now Nigeria, what’s your take on the notion that the recent fall of international commodity prices, including crude oil price, was largely caused by the slowdown of China’s economy and decline of its external demand?
It’s very complicated, especially crude oil. China has imported crude oil from other countries and is overtaking the United States because the economy is growing. I think different factors contribute to this. I understand the international commodity prices are issues of great concern in Nigeria. But commodity prices are not something for only the Chinese to decide. There are many reasons for the fall of crude oil price, but two that I believe are most important are the shale gas revolution and the depressed world economy. Because of the shale gas revolution, U.S. oil production capacity has been dramatically increased, and its crude import volume is gradually declining.
China’s steady economic development has benefited the world. China is comparatively making our contribution. China contributed about 30 per cent to global growth in the first half of the year. With commodity prices dropping markedly on the global market, the growth of China’s foreign trade volume is slowing down.
But even so, the actual amount of commodities China imported has continued to go up. Between January and August this year, China imported 220 million tons of crude oil, up by 10 per cent over the previous year. Soy bean imports rose by 7 per cent, and iron ore imports were over 600 million tons, more or less the same as last year. China will adopt a more proactive import policy and place greater emphasis on the quality of imports and exports.