TRADE RELATIONS
THE SECOND summit of the Forum on China-Africa Co-operation (Focac) just concluded in South Africa. It was held at the time when China’s economy is shifting toward a “new normal” of slower growth. What happens with Sino-African co-operation will naturally attract attention from the international community.
China’s economy is now in a pattern of medium to high-speed economic growth after more than three decades of roaring growth. Under the new normal, China aims to adjust its economic structure and address its industrial overcapacity. That means China’s demand for raw materials as well as bulk commodities such as oil and gas will naturally decline. At the same time, prices of raw materials and commodities have fallen dramatically in recent years. This will certainly put pressure on African countries, which rely on exports of raw materials and commodities, and it may create challenges for bilateral trade between China and African countries. The International Monetary Fund has cut its growth forecast for African countries this year, with eight major oil producers in Africa, including Nigeria and Angola, projected to see growth of 3.5percent, down from the previous growth forecast of 7 percent.
Some pessimistic observers have suggested that China may not make any big moves to promote its co-operation with Africa and that some large projects China has committed itself to on the continent will be affected, given China’s slowing economy and a possible squeeze on investment spending.
But in fact, opportunities are likely to emerge as well as challenges in SinoAfrican co-operation under the new normal. First, although growth forecasts both for China and Africa have been downgraded, their growth level is still higher than the world average. China aims to maintain medium- to high-speed growth and double its 2010 gross domestic product by 2020, according to its 13th Five-Year Plan (2016-20). To achieve that goal, annual growth during the five-year period will have to be about 6.5 percent.
Given that China is now the world’s second-largest economy and has a much larger base, 6.5 percent growth would be enough to support the continuous development of Sino-African economic ties. Furthermore, both China and African countries have a strong desire and motivation to take their relationship to a new level.
President Xi Jinping and Premier Li Keqiang paid visits to Africa in 2013 and 2014, respectively, and proposed to help For instance, the first 10-year plan of action on Agenda 2063 adopted at the 25th African Union summit held in June said that the major development target for Africa is to accelerate industrialisation and achieve sustainable development. Therefore, the flagship projects that lead future Sino-African co-operation will involve transnational and trans-regional large infrastructure projects in Africa as well as projects aimed at promoting industrialisation and boosting the continent’s manufacturing.
China’s economic co-operation with other nations under the new normal will be upgraded to a model focusing on capital exports, with the previous model having relied on exports of goods. China does not only have rich experience in industrialisation, along with mature technology and equipment; China is also the world’s largest holder of foreign exchange reserves and the third-largest overseas investor. Chinese companies have been keen to invest overseas in recent years, and the country’s total outbound investment in 2014 exceeded $100 billion (R1.43 trillion).
China’s shift from being a big trader into a big investor can actually help reshape the economic and trade relations between China and Africa. Economic co-operation between China and the continent will be upgraded from the old model in which the two sides were complementary in trade in raw materials and finished industrial products into a new one in which both sides are complementary in manufacturing, development of new energy and environmental protection products as well as development of the marine economy.
Sino-African co-operation under the new normal will face both challenges and opportunities. The Focac is a historic gathering that can cement the unity between China and Africa and bring co-operation between the two sides to a new level. The author is a senior researcher at the Charhar Institute in Beijing and researcher with the Institute of West Asian and African Studies (IWAAS) at the Chinese Academy of Social Sciences. This article is republished with permission of Global Times and People’s Daily (bizopinion@globaltimes.com.cn)