The Econometer
The older generation in China can often be heard affectionately referring to Africans as feizhou xiongdi or African brothers. This term of endearment most likely originates from a time when the atmosphere of solidarity among developing nations was beginning to emerge, manifesting in gatherings like the Bandung Conference, and spurred by China’s realization of how crucial Africa’s support would be to its integration into the international community. Africa has long held a special place in Chinese foreign policy with the Forum on China-Africa Cooperation (FOCAC) being the most significant embodiments of this.
The last gathering of this triennial forum took place in Johannesburg in 2015 and concluded with the adoption of the Johannesburg Action Plan, a roadmap for cooperation between China and Africa in the three years until the next summit, to be held this year.
Looking ahead, the FOCAC Summit of September is of particular significance because it coincides with key shifts in the global economy and regional dynamics that present an opportunity for both China and Africa.
Strengthening global demand underpinned by an all-round recovery of momentum in the growth of the global economy is allowing African economies to stabilize and grow as commodity prices rise. Given the central role commodity revenues play in the vitality of economies on the continent, Africa can take advantage of the recovering commodity revenues to invest in the advancement of broader developmental objectives.
A result of the structural character of many African economies is that their sectorial orientation toward raw material and commodity exports and imports of manufactures has generated “immiserizing growth” on the continent. The kind of economic growth led by commodities is not necessarily bringing greater prosperity to African countries. The detrimental terms of trade brought about by these structural deficiencies, a legacy of extractive economies established during the colonial era, have long been problematized but there has been little success in overcoming them. This has prioritized the issue of economic diversification in many African countries. Cooperation with China has been identified as an important avenue through which to achieve this in addition to expanded intra-continental trade.
The importance of the FOCAC has been recognized by member states. Truly harnessing the potential that the platform offers will depend on African players developing an acute China-awareness and actively finding ways to use the FOCAC framework to address their unique challenges. Chinese players must likewise continue to develop an Africa-awareness, which would entail building the capacity to navigate economic relationships with countries far smaller than itself so that the sense of reciprocity and mutual benefit is truly felt.
Source: National Bureau of Statistics of China
1/South Sudan June: China and South Sudan signed a technical cooperation agreement for the modernization of state broadcasters in the East African nation. The project cost estimated at $15 million will enable the construction of two stateof-the-art broadcast studios and will also offer capacity building for South Sudanese journalists through media exchanges.
2/Ethiopia June: Ethiopia’s Chinese-built Eastern Industry Zone is expected to start the construction of the second phase as soon as demands from foreign companies increase. There are currently 83 companies under construction or operational inside the industry zone, of which 56 have already started production.
3/Kenya & South Sudan June: A Chinese firm has won the tender to construct the first tarmac road that extends to South Sudan from Kenya’s north region. China National AeroTechnology International Engineering Corp. has been contracted to undertake the construction of the 60-km road worth $20 million in a region referred to as Kenya’s breadbasket.
4/Zimbabwe June: Zimbabwe and China’s Tsingshan Holding Group signed a $1-billion MoU for establishing a steel plant in the Midlands Province that can produce up to 2 million tons of steel per annum. When fully operational, this project is expected to create 3,000 permanent jobs over the life of the project which is estimated at 25 years.
5/Namibia June: Namibian President Hage Geingob officially inaugurated the Oshikoto Police Regional Headquarters and the Omuthiya Police Station situated in the north of the country. The facilities were constructed and completed last year by China Jiangxi International Namibia.
Foreign Investment Robust Despite Concerns Over Trade
In the last month of Q2, the Chinese economy demonstrated a high level of resilience. As international concerns foment over a trade spat with the United States, the renminbi (RMB) fell 3.1 percent against the dollar within the month of June, its biggest monthly drop since 1994. Markets also showed signs of caution, as the Shanghai composite index fell 6.4 percent to 2,847.42 on June 29. Signs of an underlying strength emerge; however, as foreign investors put heavy buys on RMB-denominated domestic bonds, causing 10-year yields to decrease below the 3.5-percentage mark.
Manufacturing Activity Reflects Slowing Economy
On the back of strong performance in May, China’s manufacturing sector grew at a slower rate in June. While May saw a purchasing managers’ index (PMI) at 51.9, it dropped to 51.5 in June. This slump is attributed to several factors, including slower credit growth amid government crackdowns on certain types of lending, slowing internal demand indicated by slower growth in retail sales, and uncertainty around external demand with rising trade barriers in the United States. Furthermore, the employment sub-index indicates that Chinese factories have laid off the highest amount of staff since July 2017. These factors are all indicative of a slowdown in the economy, but this process is gradual.
BRI Gets a Boost in HK
The Third Belt and Road Summit was held in Hong Kong on the June 28, and was attended by over 5,000 participants from 55 countries. The theme of the event was Collaborate for Success. The summit served to create an opportunity for existing partners within the Belt and Road Initiative to collaborate further and to increase cooperation between nations. Various MoUs were signed at the summit. The summit was used as a platform for partners to emerge in new and existing investment projects, by giving projects the marketing they require to succeed. Projects being invested in by China include the development of a smart city in Thailand’s Eastern Economic Corridor.
The ChinAfrica Econometer is produced by The Beijing Axis, an international advisory and procurement firm operating in four principal areas: Procurement, Sales Activation, Capital, and Strategy. For more information, please contact: Kobus van der Wath, [email protected], www.thebeijingaxis.com