Natural resources from Africa helped fuel China’s economic boom, but in the first half of 2015, it’s looking more like a bust.
Chinese investment in Africa through June this year fell by more than 40 percent to its lowest rate since the global financial crisis, BusinessSpectator reported.
Now the Chinese investment landscape in Africa is changing, according to a report in ValueWalk.
Within 35 years the African population is set to reach 2 billion, accompanied by the fastest rate of urbanization in the world. China may start to look inward, but there could be the potential for internal demand in Africa due to demographic trends, said Vera Songwe, director of West and Central Africa for World Bank Group’s Washington, D.C.-based International Finance Corporation (IFC).
Internal growth may be driven by real estate development and housing, Songwe said.
China funded infrastructure and loaned money across Africa in what critics describe as deals made for construction contracts and mining rights, BusinessSpectator reported. By 2009, China was the continent’s No. 1 trading partner, bypassing the U.S.
China invested $568 million in African greenfield projects in the first six months of 2015, down from $3.54 billion in 2014.
Imports from Africa fell almost 43 percent January to June this year, underscoring the impact of China’s weakened demand for resources and energy.
But while overall investment plunged, investment in extractive industries almost doubled from $141.4 million in the first half of 2014 to $288.9 million in 2015, according to valueWalk.
The sluggish global economy, international commodity price volatility and Ebola crisis are to blame for the rapid decline, said Commerce Ministry spokesman Shen Danyang, according to ChinaDaily.
China’s direct investment to Africa fell to $1.19 billion in the first half of this year.
China wants to enhance cooperation with Africa in finance, manufacturing and infrastructure, Shen said. There are tremendous opportunities for Chinese companies in infrastructure, manufacturing, agriculture and services.
“Chinese companies are gradually diversifying their investments in Africa as they transform from aid providers to mature investors,” Shen said.
Generally, foreign direct investment has fallen across the board from emerging markets into other emerging markets, and into Africa in particular, Songwe told ValueWalk. FDI reflects changing patterns of investment.