3 December 2012
China-Africa ties deepen as China eyes new markets and moves up value chain
Africa matters more to China than ever before, and vice versa, say Standard Bank
Group economists Jeremy Stevens and Simon Freemantle. Despite erosion of the cost
competitiveness of China's exports, expectations that China will sell less manufactured
goods to Africa have proven misplaced.
In their latest report, Mr Stevens and Mr Freemantle say this is because China's
exports to Africa are likely to have increased to over USD80bn while Sino-African
trade is forecast to surpass USD200bn this year, up from USD166bn last year.
China continues to gain market share in Africa. Standard Bank Group estimates that
18% of Africa's imports were sourced from China this year so far, up from 16.8%
in 2011, 10% in 2008 and as low as 4.5% a decade ago, while Africa's share of China's
exports is steadily gaining relevance, increasing from 3.3% last year to 5% this
Jeremy Stevens, Standard Bank Group's Beijing-based economist, says that it is clear
that African markets matter more to China than ever before, and vice versa, as China's
exports to Africa have grown at a pace five percentage points faster than to any
other region this year, while China's imports from Africa have increased by 26%
this year, which is twice the speed of China's imports from any other region.
"Today, China accounts for 20% of Africa's trade. China's average monthly exports
to Africa have increased by around USD1bn each year since 2008, rising most recently
from an average of USD6bn per month throughout 2011 to an average of USD7bn per
month this year. Africa is China's fastest-growing export destination and trade
partner. China's trade with Africa has grown nearly twice as fast as its trade with
Latin America, which is the second strongest performer," says Mr Stevens.
"Chinese firms, confronting subdued activity in mature markets and tasked with shifting
up the value chain, have recognised the importance of selling goods to the large
emerging economies, especially the highly populated and increasingly wealthy ones
inAfrica," Mr Stevens says.
"Demand from African countries, especially the largest ones such as Kenya, Egypt,
Angola, Nigeria and South Africa (KEANS), has simply become even more important
to Chinese firms. 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
The report also notes that the rise in China's imports from Africa this year is
virtually single-handedly on the back of sales of crude oil, notably from Angola.
China's imports of African iron ore are flat, while copper, steel and aluminium
have slumped by 29%, 54% and 60% respectively, during the first ten months of the
year, according to the report.
"Looking ahead, it is inevitable that as the Chinese economy shifts away from investment-led
growth, the incremental growth in its demand for commodities will moderate. For
many African countries, weaker exports may harm already strained current accountbalances
at a time when attracting financial inflows is more challenging," Stevens argues.
And China is still acompetitor for Africa's nascent intra-Africa trade and will
remain one until Africa develops manufacturing nodes. But Stevens believes that
China is actually Africa's perfect partner for supporting the quest, but will need
constructive engagement. "Partnerships must therefore aim to entrenchcommercial
ties amongst African economies," he says.