2018 China-Africa trade growth of 20%

2018 China-Africa trade growth of 20%

The trade volume between China and Africa increased from US$170 billion in 2017 to US$205 billion in 2018. The growth rate reached 20% in 2018, the highest record since 2011. In 2018, the Beijing Summit of the China-Africa Cooperation Forum was held, attended by nearly 50 African heads of state and government.

During the same period, China’s exports to Africa increased by double-digits, from $96 billion in 2017 to $106 billion. China’s exports to Africa’s largest markets, such as South Africa, Nigeria, Ghana, Kenya, Tanzania and Ethiopia, have grown at a reasonable rate, while markets in the Democratic Republic of the Congo, Mozambique and Zambia have seen the fastest growth, both exceeding 40% year-on-year.

Due to the expansion of China-Africa trade, Africa accounts for 4.2% of China’s total exports. This figure, although slightly lower than 4.6% in 2016, is twice as high as 10 years ago and higher than 2.8% of Africa’s global GDP in 2018. It also means that China now accounts for about one-fifth of Africa’s total imports, twice as many as 10 years ago. These two numbers will continue to grow as Chinese exporters further expand into the African consumer market. We expect China’s exports to Africa to rise by 11.1% in 2019, reaching $118 billion. As Chinese exporters are committed to making the target market more diversified and more focused on Africa, this amount is expected to continue to grow by 10%-15% annually, starting with more than $200 billion in 2024.

Chinese exporters are now more focused on the African market, largely driven by Africa’s own growth. We expect that sub-Saharan Africa’s GDP will grow at an average rate of 4.1% over the next five years, more than double the developed economies. The rapid development of key economies such as Ethiopia, C?te d’Ivoire, Tanzania, Mozambique and Ghana will lead to steady economic growth in Africa. In the next five years, more than half of African economies are likely to experience an average annual growth rate of at least 5%, while less than one-third of African economies in the past five years have achieved such growth. Importantly, the economies with the widest, most populous and most regional influences in Africa, such as Nigeria, South Africa, Angola and Kenya, are expected to grow steadily.

Although China’s imports of goods have risen, the exchange rate of imports and exports between Africa and China has continued to rise in recent years as raw material prices have rebounded since 2015. Africa’s total exports to China have rebounded, rising 33% in 2017 and 30% in 2018, reaching nearly $100 billion. However, most African exports to China come from only a few African countries. Only South Africa and Angola account for more than 50% of the African continent’s exports. If combined with the Republic of the Congo, the Democratic Republic of the Congo, Ghana and Zambia, this proportion will rise to 75%.

In the next three to five years, China-Africa trade is expected to grow by about 10% annually. This means that China-Africa trade will exceed US$300 billion during this time, twice as much as in 2016. However, during the same period of time, China’s imports from Africa are likely to slow down and fall to about $150 billion by 2025. There are several reasons for this result. The primary factor is that China’s continued economic adjustment will lead to a slowdown in economic growth and a slower growth in fixed asset investment. In addition, as China’s economy continues to focus on consumption and services, the share of investment in China’s GDP will fall. In the next few years, raw material prices will also face adverse effects.

The way China interconnects with the rest of the world is changing. From an African perspective, this means that the traditional approach will no longer be effective, as the capital expenditure cycle that once pushed the economy has shrunk. In fact, considering the significant impact of supply-side reforms, China’s role in the global commodity market has shifted from the demand side to the supply side. In the past 20 years, China’s demand for raw materials has led the commodity market. Today, supply of commodities such as steel, coal, aluminum, cement and glass has fallen. This means that commodity prices are rising and should be favourable to the exporters’ terms of trade. However, China’s demand growth has slowed.

Africa’s trade deficit with China has only begun in 2015 and is relatively new. In 2016, the trade deficit peaked – $38 billion, but by 2018 it fell to just $8 billion. However, as Africa’s imports from China grow faster than its exports, Africa’s trade deficit will deteriorate again. Africa’s trade deficit with China is likely to expand to 95 billion U.S. dollars by 2025, which will further complicate China’s geopolitical relations with Africa and affect China’s emphasis on “South-South cooperation” and Persuasiveness in cooperation of solidarity among developing countries.

In the 2018 China-Africa Cooperation Forum Beijing Summit, the focus of the next phase of China-Africa cooperation is to achieve industrialization in Africa, create employment opportunities and complete technology transfer through investment in manufacturing. These advantages include relatively low labor costs, abundant natural resources in African countries, fast-growing domestic markets, and favorable changes.

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