December 3, 2015 12:20 pm
Xi Jinping, the Chinese leader, is in South Africa for this week’s triennial Forum on China-African Cooperation amid concern about the effect of the Chinese slowdown on Africa.
Sino-African relations span finance, aid, health and education co-operation and trade. Most of these are not easily measurable, but those that are — in particular trade, investment and finance — show signs of weakening.
Reduced external demand and lower commodity prices caused a 13 per cent contraction in Chinese imports in the 12 months to October 2015 over the same period a year earlier. By comparison, the value of imports from Africa over the period fell 32 per cent.
The contraction in imports is steeper for Angola, South Africa, Republic of Congo, Equatorial Guinea and Zambia, China’s main African trading partners, which together account for more than 70 per cent of all Chinese imports from Africa.
China is Africa’s main export market and also its largest source of imports. After 15 years of closer trade ties, China accounts for about 20 per cent of imports in Sub-Saharan Africa and about 15 per cent of its exports. But in the past year the share of exports to China has started to decline while the growth of Chinese imports has been accelerating.
The combination of rising imports and falling exports caused the trade balance of sub-Saharan Africa to plummet.
Some African countries are more exposed to the Chinese market than the continental average would suggest. Sixteen sent more than 20 per cent of their exports to China last year and for seven, including Sierra Leone, Eritrea, Republic of Congo, Angola and Sudan, China accounted for 40 per cent of their total exports.
The steep contraction in the value of Chinese imports from Africa is largely due to the fact that commodities and crude materials make up more than 85 per cent of the total.
Aside from the general slowdown in imports and commodity prices, the data also suggest trade preferences are changing.
Take iron ore. According to Chinese customs statistics the value of total iron ore imports contracted at an annual rate of 40 per cent in the 12 months to October, while the total volume of imports contracted by only 0.1 per cent, reflecting falling demand and lower prices.
However the volume of iron ore imports from Africa contracted by more than 17 per cent annually in the year to October, while that from Latin America was stable and from Oceania — mostly Australia — increased.
Investment data confirm China is the biggest player in Africa, its interests focused on mining and oil.
In 2013, China was the largest M&A investor in Africa, accounting for 37 per cent of all deals by value, according to Dealogic. About 80 per cent of Chinese acquisitions in Africa were in the mining or oil sectors. But in the 11 months to November this year Chinese acquisitions totalled less than $600m, about 1/20th of the value of two years ago.
The slowdown is even more evident in Chinese lending to support African infrastructure projects.
According to the annual report of the Infrastructure Consortium of Africa, Chinese lending for projects in 2014 was substantially lower than in each of the previous three years.
China is still the largest lending country to infrastructure projects in Africa but in 2014 it accounted for only 4 per cent of total commitments, compared with about 50 per cent the previous year.
The report said the change “may indicate a recalibration of Chinese investments in Africa’s infrastructure”.
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