China economic slowdown to affect Africa

Category: Finance & Banking Created on Wednesday, 23 May 2012 10:12 Published Date

23-05-2012
by MTHULISI SIBANDA
South Africa Bureau
JOHANNESBURG, (CAJ News) - AN economic deceleration in China may have profound negative effects on the commodities driven economy, mainly Africa.

This is according to China-based Standard Bank economist Jeremy Stevens, in South Africa to address clients and investors on economic developments in the world’s second-biggest economy.

“Right now, Africa should be very concerned because its economies are now more sensitive to any developments in China. China has become the biggest investor in Africa and the continent’s most significant trading partner, so whatever happens in China matters a lot to Africa.

“A deceleration in the Chinese economy would spell trouble for African economies. This would mean weaker commodity prices, and African economies have largely been dependant on strong Chinese demand for its resources," said Stevens.

He said whilst it was still a fat-tail risk, Stevens said African countries needed to start thinking seriously about how they would deal with the economic downturn in China.

Stevens’ comments come as fears of a downturn in the Chinese economy mount, with some analysts pointing to the strong possibility of a minus 7 percent GDP growth.

In relative terms, most observers consider this figure to amount to a hard landing for China’s economy.

While a sharp fall in Chinese growth would have a more widespread impact globally, Stevens says Africa would be the hardest hit because of its dependence on commodity exports to China.

Africa’s economic growth in the past five years has been closely tied to China’s economic fortunes.