Economic relations reaffirmed at China-Africa summit

​South Africa hosted the sixth ministerial conference on China-Africa Cooperation early this month in Johannesburg. Chinese president Xi Jinping highlighted China’s commitment to deeper cooperation with African nations despite his own slowing economy. Drops in China-Africa trade and Chinese foreign direct investment in African countries have raised concerns as to whether some countries can cope with effects of China’s evolving economy. Xi promised African countries $60 billion in financing supplied via several channels as well as debt restructurings.

China has long been Africa’s most important trading partner. African countries mainly export raw materials to China and import consumer goods from China. On average, 20 % of Africa’s imports come from China and about 15 % of African countries’ exports are destined for China. The dependence on China is much higher for some countries. For example, over half the exports of Eritrea, Congo and Angola go to China. Among the 54 African nations, 16 send over 20 % of their total exports to China. While the value of China-Africa trade turnover exceeded $220 billion last year, the value of African imports to China in October was down over 30 % y-o-y due to low commodity prices. China’s exports to Africa in October continued to rise at about 7 % y-o-y.

Chinese investment in Africa has grown rapidly over the past decade, even if only 3 % of China’s outbound FDI was destined for African countries and China was only the seventh largest investor in Africa (the US is Africa’s largest provider of FDI). Figures from China’s trade ministry show FDI outflows to Africa in January-June amounted to $1.2 billion, a drop of over 40 % y-o-y. Most Chinese investment in Africa went to the raw materials and energy sectors.

The South China Morning Post reports the number of projects in Africa involving Chinese firms has risen this year, even if the volume of FDI has fallen. Chinese firms are participating in e.g. port, rail and pipeline projects. In the first half of this year, the total volume of agreed Chinese projects and investments was $18 billion. For all of 2014, the volume of such projects and investments was $34 billion.

China’s trade with African countries

Source: Macrobond