Not very long ago, trade between China and Africa would keep surging to new high records. The situation has now changed. A slump in commodity and oil prices is taking its toll on Africa’s export-reliant economies, prompting fears of a new and devastating debt crisis. Chinese trade and investment in Africa are also slowing as the People’s Republic of China undergoes a deep economic transformation from being a manufacturing-led economy to one driven by services and consumption.
For African countries, this leads to numerous concerns: for those who raised US-dollar denominated debt in the past years, it might have direct consequences on their fiscal health due to substantial increase of the reimbursements in dollars. Another issue is about the potential drying up of trade flows from China to Africa. As an example, China is financing more projects in Africa than the World Bank : between 2001 and 2010, China Exim Bank loaned an estimated $67.2 billion to Africa when it was $55 billion from the World Bank on the same period. If these Chinese levels were to drop down, it might become worrying.
While none of this sounds encouraging, it might actually be a very important next step in the China-Africa relationship where better, smarter policies emerge from these adversities. Rebalancing the Chinese model towards more consumption also means more imports in the long run from other emerging countries. Already, some Chinese companies are starting to shift production to Africa, as it is the case in Ethiopia. Africa might become one day the workshop of the world.
Besides, it could help to rebalance the relationships of the continent with other regions of Asia. For instance, there is a growing interest among Southeast Asian companies to explore opportunities in Africa. That investment has two main objectives : to develop new sources for an increasing demand for natural resources (crude oil and palm oil); and to find new markets for their products (mainly industrial manufactures). Southeast Asian countries’ rapprochement with Africa has a strong potential to underpin the continent’s development through less asymmetric bilateral links in comparison with those maintained with Western European countries, the United States, and China.
It is the same thing for Japan : last August, Japanese Prime Minister Shinzo Abe told African leaders that his country will commit $30 billion in public and private support for infrastructure development, education and healthcare expansion in the continent. A tranche of Japan’s new package will go towards various power projects to increase production capacity by 2,200 megawatts across the continent. Money will also be spent on training 20,000 mathematics and science teachers throughout Africa, as well as 20,000 experts on how to handle infectious diseases.
All these facts show us one thing : inspite of difficult circumstances, Africa still generates interest. And what makes it interesting is that it comes from various parts of the world. This is an opportunity of diversification and this is a great thing for Africa’s development !