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Friday, 28 August 2015 09:17

China Slow Down Worrying For Africa

BrautigamBy Uzodinma Iweala

WASHINGTON, August 28, 2015 (Ventures Africa) -- Six years after the global economic crisis, global stocks have again been hit by the recent crash of the Chinese financial markets and a possible slowdown in the Chinese economy. Globally, investors are currently moving away from assets, such as stocks and government bonds, as they seek to re-evaluate exposure to risk. As the global economy heads into a stormy period lead by a faltering China, how will African countries fair?

Earlier this year Ventures Africa spoke with China-Africa expert Deborah Brautigam, the Bernard L. Schwartz Professor of International Political Economy and the Director of the China Africa Research Initiative (CARI) at Johns Hopkins University’s School of Advanced International Studies (SAIS) in Washington, DC. We asked her what a slow down in China means for African economies and the China–Africa story.

Here’s what she had to say (responses have been edited for length and clarity):

Ventures Africa (VA): How will an economic slowdown in China affect the China Africa relationship?

Deborah Brautigam (DB): I think the obvious first level of answer is that the slowdown in China’s economy will affect their demand for natural resources and so in the countries from which they are importing natural resources [there] will be fewer revenues going into those countries. That could have an impact on the revenues and the economic resources available to those governments. However there is a lot of other activity that’s over and above the resources. For example, the trade relationships of imports of Chinese goods into Africa – expect those to continue, maybe not the steeply rising curves that we’ve seen, but they should continue because the African middle class is growing, the people in the lower-middle class is also growing and they’re ready to consume a wider variety of goods and services. But they still can’t afford things that come from the United States or from Japan, so they’re looking at the lower end of the market. That kind of demand is going to continue, and even if it slows down a bit, it’s not going to slow down terribly. We can see some reflection of this from the specifics in the global economic crisis that happened around 2008 2009. There was a dip in trade. There was a dip in investment. It did recover pretty quickly, but that kind of slow down is a little bit of worrying indicator of what might happen if things slow down in China again.

On the other hand, there is a whole political relationship and I don’t expect that to change. There is a political relationship between the Chinese government and a number of African countries that’s been strong for decades. They’ve been exchanging visitors. They’d have Chinese presidents and prime ministers or premiers coming to African countries and vice versa… We have a number of their prominent state visits that happened in the 1960’s, 1980’s, 1990’s and so on. That kind of activity will continue. Africa is important politically not just in terms of natural resources.

VA: Can you unpack the political importance of the African continent to China?

DB: There are 54 countries, 54 governments in Africa, and most of them have representation at the United Nations, and most of them are members of the WTO. Whenever the Chinese government wants to gather support, either to resist something that it’s been asked to do or to get votes in favor something that it wants, it likes to be able to have friends to call on, so having closer political relations in Africa matters to them.

Some people say that the Chinese – because they’re an authoritarian dictatorship – they want to have more authoritarian dictatorships around the world to make it safe for their authoritarian dictatorship to continue. I don’t see it that way. I don’t think they really care a whole lot what the form of government is, as long as they could do good business. They care much more about the stability. So if the country is a democracy but they’re always unstable and governments are flipping around and there’s a lot of chaos, they wouldn’t be happy with that. Nut they are perfectly happy to have South Africa or Mauritius or other very stable democratic countries as close partners with them. Political stability matters but I don’t think the form of government matters to them.

VA: Let’s go back to what you said about the past economic crisis in 2008 as indicator for what might happen if China slows down again. Which countries do you think would be most exposed to a Chinese slowdown and what would we expect to see?

DB: A lot of countries, China has now become their primary trading partner and so you’d have to look country by country. But Angola— China consumes a lot of Angolan oil. Right now the demand is still strong but the price of that oil has dropped. I don’t know how that trade relationship works in detail. They do have some arrangements where they prepaid for some of the oil and it could be they paid too much now that the price has dropped. But Angola would be one country that we would look at. Another would be South Sudan, certainly that’s a precarious relationship. South Africa – also China is their largest trading partner and South Africa exports a lot of raw materials to China, so South Africa is one which you look at. Zambia again, a lot of copper from Zambia is going to China… The DRC, it’s always prone to instability at various times — a lot of demand from China for the various minerals that they process… I think that’s about it for right now. There’s a lot of future development coming on stream – things like Mozambique and gas; Tanzania may have fossil fuel offshore. But I think those are probably the big ones. Nigeria’s not a big exporter to China for example. They export more of their oil to the United States.

VA: With the United States having essentially eliminated their need for Nigerian oil, do you think that China will play a bigger role there. Is that a possibility?

DB: It certainly is a possibility. I know there have been some purchases and acquisitions by Chinese companies of other companies in Nigeria as they’ve decided to move out of fields that are little bit more marginal but I think people are not quite sure – is this a game changer, the shale oil revolution has changed everything for good, or is this just temporary factor. I don’t think we really know the medium term even what’s going to happen in the energy market. I do think that Nigeria would be wise to continue to diversify its trading partners. No country should be tied up with just one major partner. That makes them a little more vulnerable, but a lot of countries in Africa are also exporting to Europe. So that still remains a market. That’s important for them.

VA: If you had to outline what you think the most major points are in the development of a Chinese relationship with various countries on the African continent, what would say are the milestones we should be looking at over the past few decades?

DB: I’d say that there was a large milestone that a lot of people don’t know about which is in the 1980’s. I think it was Premier [Zhao Ziyang who] came to Africa and really, he’s the one who said that we’re going to start putting our relationship on a more commercial footing – it’s not just going to be about aid anymore. That was important for starting off the business engagement there. But then, I think we’d have to probably go up to 2006 to really look at a major milestone and that’s the Forum on China-Africa cooperation which happened in Beijing actually. That’s when you had almost every head of state in Africa showing up and walking the red carpet in Beijing. That was remarkable. No country had been able to do that so far, and that really is the start of the level of Chinese loans going into Africa, the investment, the trade. They start making the predictions about how trade would double, and it all came to pass just it was predicted in 2006.

If there are others, I think the whole Darfur tragedy in Sudan was a milestone in that, it became that first time the Chinese set up a whole system of shuttle diplomacy and they got a diplomat involved in these negotiations in Africa. They’d certainly been doing something like that in North Korea, but you hadn’t really seen that kind of more intense engagement and partnering with Western Countries and an African political problem before.

VA: So China had its Forum on Africa Summit in 2006 and the United States hosted the US-Africa Leaders Summit in 2014. How you would compare those two events? There was a lot of commentary around how the US-Africa Leaders summit was a case of too little too late on the part of the Obama administration, and that the Chinese had already grabbed whole swathes of the African market?

DB: Well I think, the point that I make about the US-Africa Summit is not so much that it was all about China. It really [was] about Africa. The Japanese were the first to have a major summit … and they did that before the Chinese, and then Chinese had then their major summit, and then you had India having a major summit; you had Europe having a major summit and we [were] the last ones to do it. I don’t know if Brazil’s done one yet… It’s not just about the Chinese; it’s about Africa and it’s about others recognizing that Africa is different now. It’s a more available partner. A lot of countries are getting their act together and it’s on the rise; it’s on the move and the United States is late to realize that … It’s about the U.S and other partners engaging with Africa and I’m glad that we finally looked at Africa as being important enough and interesting enough that we can hold a major summit, like everybody else has been doing.

VA: Can you speak about how you think the relationships between China and African countries are going to evolve?

DB: There are three countries that we should be looking at for relationship with China to change… One of them is Ethiopia. It’s already pretty strong. I think it’s going to continue get stronger. The second is Tanzania which has a very very long standing relationship. I think as they continue to find new resources off-shore in Tanzania, and as they continue to get there investment house in order, they’re also going to be attractive. The third is Mozambique. This is also an area of a lot of interest to the Chinese … I don’t see this happening as much in Southern Africa or in West Africa, this kind of interest, but Mozambique, Tanzania and Ethiopia are of interest…(*This interview was originally published by the Ventures Africa)



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