Africa Business Communities

China set to beat US as Africa's largest market

China is set to become Africa's largest export destination this year, reflecting a dramatic alteration since 2008 when Africa exported half as much to China as it did to the US, according to Jeremy Stevens, Standard Bank Group's Beijing-based economist.
Stevens noted that China-Africa ties have continued to mature over the past decade, substantially altering the make-up of Africa's political and economic milieu. China's foresighted engagement with Africa back at the start of the past decade was a master stroke according to Stevens, allowing Beijing to steal a march on Africa's other partnerships.

In 2011 SA exported R90.2 billion to China, R42.7 billion to Germany, R29 billion to the UK, R12.9 billion to Italy, and R6.3 billion to France. The 27 members of the European Union received R152.5 billion out of total exports of R707.3 billion. The US received R61 billion worth of SA exports.

China was at the centre of the re-calibration of Africa's trade and investment cords in a time of global slowdown and the stuttering of advanced economies. Latest figures show that trade between China and Africa reached US$160 billion in 2011, up by 28% from the previous year. Last year, China accounted for 18% of Africa's trade compared with 10% in 2008.

"Despite becoming marginally more expensive, China has managed to grow exports to Africa rapidly. High-level political visits have certainly helped, but, perhaps more critically, success has bred success and Chinese and African businesses are now more comfortable transacting with one another. Looking forward, China is well-positioned to participate in Africa's next phase of development," he said.

He believed that two ingredients had re-enforced diplomatic support: capital from policy banks and time to develop two-way trust and establish commercial institutional know-how and infrastructure.

State-Owned Enterprises (SOEs) encouraged to "go out" have been successful in Africa, enabling China to ramp up its exports of equipment, machinery and vehicles, while simultaneously creating commercial (and employment) opportunities.

In addition, greater support will come this year as mature economies continue to stutter. Outward investment is critical to China's development. Currency internationalisation will mean more investment and trade between China and Africa. Chinese exporters to Africa will benefit indirectly through subsidies at the 59 exporting zones.

African imports from China expanded by 23.7% in 2011 to US$73 billion. Last year, Africa sourced 16.8% of its imports from China from only 4.5% in 2002. Meanwhile, Africa's importance to China also increased, accounting for 3.8% of China's exports from 2% in 2002.

Stevens noted that while China had seen a downgrade in domestic potential growth and was shifting towards less energy-intensive growth levers, its US$7-trillion economy would still demand more in absolute terms. Meanwhile, robust growth out of several core African economies would ensure Chinese products continued to find fertile export terrain on the continent.

"China's commodity demand is structural and will be longstanding. In addition, Africa's demand for infrastructure and China's differential approach to financing creates markets for Chinese exports; commercial opportunities for its SOEs and employment opportunities for Chinese people," added Stevens.


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This article was originally posted on Sustainable Development Africa Platform

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