## China and Africa: Will the Honeymoon Continue? _IMF Blog, December 21, 2015_ ## Source details **Canonical URL:** [China and Africa: Will the Honeymoon Continue?](https://www.imf.org/en/blogs/articles/2015/12/21/china-and-africa-will-the-honeymoon-continue) ## Other formats - [Markdown version](/en/blogs/articles/2015/12/21/china-and-africa-will-the-honeymoon-continue/index.md) - [Structured JSON version](/en/blogs/articles/2015/12/21/china-and-africa-will-the-honeymoon-continue/index.json) - [Bundle manifest](/en/blogs/articles/2015/12/21/china-and-africa-will-the-honeymoon-continue/bundle-manifest.json) ## Bibliographic details - Authors: Wenjie Chen, Roger Nord - Published: December 21, 2015 --- ### Overview - China’s President Xi Jinping’s pledge of US$60 billion in financial support over the next three years underscores the depth of the partnership between China and Africa. - China’s shift from an investment-heavy, export-led growth strategy to a model that relies more on domestic consumption has driven a dramatic decline in commodity prices, with significant short-term consequences for sub-Saharan Africa’s commodity exporters. - Over the medium term, the shift may create opportunities for sub-Saharan African countries to diversify away from natural resources and create jobs for young populations, conditional on pursuing the right policies to foster competitiveness and integrate into global value chains. ### Sub-Saharan Africa’s new trading partners - A marked change in trading partners occurred over the past twenty years, accelerating in the past decade. - Advanced economies represented close to 90 percent of exports in 1995; by 2014 export destinations such as Brazil, China, and India accounted for over 50 percent of sub-Saharan African exports, with China accounting for about half of that. - Composition of trade with China: - Exports to China: Fuel, metal and mineral products represent 70 percent of sub-Saharan African exports to China. - Imports from China: Majority are manufactured goods, followed by machinery. ### Economic impact of engagement with China - Access to new markets for raw materials helped spur Africa’s exports, which quintupled in real value over the past twenty years. - Trade engagement with China and other new partners reduced volatility in sub-Saharan Africa’s exports, cushioning the impact of the 2008–2009 global economic crisis. - China increased its contribution to the growth of sub-Saharan African exports during the Great Recession, helping cushion sub-Saharan Africa’s growth. - Access to cheap Chinese consumer goods boosted African living standards and contributed to low and stable inflation. ### New sources of financing and investment - China’s outward FDI to sub-Saharan Africa increased significantly since 2006 but remained less than 5 percent of total FDI to sub-Saharan Africa in 2012. - Chinese loans and contracts: - Chinese loans to sub-Saharan Africa as a share of total debt rose from less than 2 percent prior to 2005 to about 15 percent in 2012. - According to the Heritage Foundation, sub-Saharan Africa accounted for about a quarter of all Chinese engineering contracts worldwide by 2013 on a stock basis. - Most contracts were awarded in energy (hydropower) and transport (roads, autos, ports, aviation). - Financing of infrastructure projects—where little concessional financing is available—has helped African countries expand industrial development and transform economic structure. - Private Chinese entrepreneurs are increasingly investing in services and manufacturing in sub-Saharan Africa, providing potential new opportunities. ### Short-term challenges and medium-term opportunities - Short-term challenges: - China’s rebalancing has led to precipitous declines in China’s imports, causing declines in both the volume and the prices of sub-Saharan Africa’s exports. - Growth in sub-Saharan Africa for 2015 has weakened markedly compared to previous years, with large differences among countries. - Decline in investment indicators: number of FDI projects registered with China’s Ministry of Commerce dropped from 311 in 2014 to 260 in 2015. - The Ministry estimated a 45.9 percent drop in China’s FDI flows to Africa in the first quarter of 2015 compared to the same period last year. - Uncertainty whether commercial opportunities for pledged US$60 billion financing—notably in natural resources—will materialize. - Medium-term opportunities: - China’s reduced role as a low-cost producer opens space for developing countries to enter global value chains; examples cited include Vietnam and Bangladesh moving into the garment and textile value chains as China moves up value chains. - Demographic transition: by 2035 the number of sub-Saharan Africans reaching working age (15-64) will exceed that of the rest of the world combined, offering a potential comparative advantage in abundant labor. - If sub-Saharan Africa fosters structural transformation and integrates into global value chains, it could boost growth and poverty reduction over the coming decades. ### Policy implications and recommendations - Policymakers in sub-Saharan Africa should: - Pursue policies that foster competitiveness and integration into global value chains to capitalize on demographic advantages. - Use new sources of financing—particularly for infrastructure—to support industrial development and structural transformation. - Leverage engagement with China and other new partners to reduce export volatility and stabilize growth. - Seize the medium-term opportunity created by China’s rebalancing rather than squander it. ### Key statistics and figures (as reported) - US$60 billion — China’s pledge in financial support over the next three years. - Close to 90 percent — share of exports going to advanced economies in 1995. - Over 50 percent — share of sub-Saharan African exports going to Brazil, China, and India in 2014. - About half of that (the over 50 percent) — share accounted for by China in 2014. - 70 percent — share of sub-Saharan African exports to China made up by fuel, metal and mineral products. - Quintupled — Africa’s exports increased in real value over the past twenty years. - Less than 5 percent — China’s share of total FDI to sub-Saharan Africa in 2012. - Less than 2 percent (prior to 2005) to about 15 percent (in 2012) — Chinese loans to sub-Saharan Africa as a share of total debt. - About a quarter — share of all Chinese engineering contracts worldwide accounted for by sub-Saharan Africa by 2013 (on a stock basis). - 20 percent — share China accounted for of world consumption of nonrenewable energy resources in 2010. - 23 percent — share China accounted for of major agricultural crops in 2010. - 40 percent — share China accounted for of base metals in 2010. - Growth in sub-Saharan Africa for 2015 — described as weakened markedly compared to previous years. - 311 (2014) → 260 (2015) — number of FDI projects registered with China’s Ministry of Commerce. - 45.9 percent — estimated drop in China’s FDI flows to Africa in Q1 2015 compared to Q1 2014. - By 2035 — year when the number of sub-Saharan Africans reaching working age (15-64) will exceed that of the rest of the world combined. *Source: Wenjie Chen and Roger Nord, December 21, 2015 — "China and Africa: Will the Honeymoon Continue?"* --- ## Content in this bundle - **中国与非洲：蜜月会继续下去吗？iMFdirect博客; 2015年12月21日** - [中国与非洲：蜜月会继续下去吗？iMFdirect博客; 2015年12月21日 (Markdown version)](/external/chinese/np/blog/2015/122115c.pdf.md){rel="alternate" type="text/markdown"} - [中国与非洲：蜜月会继续下去吗？iMFdirect博客; 2015年12月21日 (PDF)](/external/chinese/np/blog/2015/122115c.pdf){rel="external" type="application/pdf"} - **China e África: Será que a lua-de-mel vai continuar?** - [China e África: Será que a lua-de-mel vai continuar? (Markdown version)](/external/lang/portuguese/np/blog/2015/122115p.pdf.md){rel="alternate" type="text/markdown"} - [China e África: Será que a lua-de-mel vai continuar? (PDF)](/external/lang/portuguese/np/blog/2015/122115p.pdf){rel="external" type="application/pdf"} - **Regional Economic Outlook: Sub-Saharan Africa; April 2015** - [Regional Economic Outlook: Sub-Saharan Africa; April 2015 (Markdown version)](/external/pubs/ft/reo/2015/afr/eng/pdf/sreo0415.pdf.md){rel="alternate" type="text/markdown"} - [Regional Economic Outlook: Sub-Saharan Africa; April 2015 (PDF)](/external/pubs/ft/reo/2015/afr/eng/pdf/sreo0415.pdf){rel="external" type="application/pdf"} --- ## References - [عربي](http://blog-montada.imf.org/?p=3931) _Source: https://www.imf.org/en/blogs/articles/2015/12/21/china-and-africa-will-the-honeymoon-continue_