Expectations that sales of China’s manufactured goods to Africa would shrink have been misplaced, according to Standard Bank researchers Simon Freemantle and Jeremy Stevens.
Although China’s cost competitiveness has eroded in recent years, China’s exports to Africa probably increased to over $80 billion (R686bn) last year, they said, while estimating that two-way Sino-African trade surpassed $200bn, up from $166bn in 2011.
Given these increases, China continues to gain market share in Africa. Standard Bank estimates that 18 percent of Africa’s imports were sourced from China in the first 10 months of last year, up from 16.8 percent in 2011, 10 percent in 2008 and as little as 4.5 percent in 2002.
China’s exports to Africa grew at a pace 5 percentage points faster than to any other region last year, while China’s imports from Africa increased by 26 percent, twice the speed of China’s imports from any other region, according to Stevens, who is based in Beijing.
He attributed the strong import growth almost entirely to sales of crude oil, notably from Angola. China’s imports of African iron ore were flat, while copper, steel and aluminium imports slumped by 29 percent, 54 percent and 60 percent, respectively, during the first 10 months of 2012, according to the bank’s report.
“Today, China accounts for 20 percent of Africa’s trade. China’s average monthly exports to Africa have increased by about $1bn each year since 2008, rising most recently from an average of $6bn a month throughout 2011 to an average of $7bn last year.”
Africa is China’s fastest-growing export destination and trade partner, and trade with Africa has grown nearly twice as fast as trade with Latin America, which is the second-strongest performer.
The shift toward Africa has been aided in recent years by “subdued activity” in mature markets. Demand from Europe, a major market for Chinese goods, has slowed as that region has been in recession. Growth in other advanced economies has been slow, dampening their demand for goods from China.
“Demand from African countries, especially the largest ones such as Kenya, Egypt, Angola, Nigeria and South Africa, has simply become even more important to Chinese firms,” Stevens said. “And China’s exports of industrial goods are continuing to squeeze out producers from mature economies, as sellers move up the value chain to offset rising costs.”
Changes lie ahead as China starts to restructure its economy, shifting policy emphasis towards consumption and away from investment-led growth.
Stevens said the incremental growth in the country’s demand for commodities would moderate. For many African countries, weaker exports may harm already strained current account balances, at a time when attracting financial inflows is more challenging.
“And China is still a competitor for Africa’s nascent intra-Africa trade and will remain one until Africa develops manufacturing nodes.”
Stevens suggested that partnerships with China should aim to entrench commercial ties among African economies.
Source :iol.co.za
