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China’s rebalancing spells changes for African trade.

The impact of structural reforms in China coupled with the fall in commodity prices are now being felt in global markets, especially so in resource-rich African economies. Sub-Saharan African economies in particular have been overly reliant on Chinese resource demand for their economic performance. Over the past 15 years, China has become Africa’s largest trading partner and an interdependence or “growth coupling” has become very evident.



This slowing demand can be seen over the last two years in terms of the value of African commodity exports, amplified by the fall in global commodity prices. In the first quarter of 2015, the value of crude oil imports from Africa was 50% less than it was in Q1 of 2014. In addition, iron ore imports contracted 55% in value terms, while copper imports from the continent slid 39%.



Nonetheless, China continues to be a key driver of global economic growth, and the recalibrations in its economic makeup will certainly test the resilience of its economy, as well as redefine the commercial relationship and terms of engagement of this Asian giant with key commercial and trading partners, including the African continent.



Which African countries will be impacted the hardest?

In 2015, almost 80% of China’s crude oil imports from Africa came from Angola, Republic of Congo, Sudan and South Sudan – with Angolan exports making up 61%. Crude oil exports from Equatorial Guinea and Nigeria account for 5% and 3% respectively.



In iron ore, 95% of Chinese imports from Africa came from three countries – South Africa (62%), Sierra Leone (21%) and Mauritania (12%). Around 73% of South Africa’s total global iron ore exports were absorbed by China, illustrating the country’s exposure to a Chinese slowdown.



And in copper, 87% of Chinese imports from Africa originated from Zambia and the Democratic Republic of Congo (DRC), with a further 7% from South Africa. Roughly 40% of Zambia’s total copper exports were absorbed by China, 42% for the DRC, and near 60% for South Africa.



Despite slowing growth, the Chinese government and private companies will continue their long-term strategic geopolitical relationships and investments across the continent. China is invested in African nations for the long term especially in relation to infrasturcture construction.



Whilst a sizable funding commitment was announced at the sixth Forum on China-Africa Cooperation (FOCAC) to create a US$10bn China-Africa industrial capacity cooperation fund to support investments into value-adding sectors including manufacturing, hi-tech, agriculture, energy and infrastructure by Chinese firms in Africa. It is evident that African nations must rebalance their economies as China dose and a new growth model must be found in the near term. African businesses will need to refocus their value proposition for doing business given China’s own internal recalibration.





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