Economic pundits once observed that when the U.S. sneezed, the rest of the world often caught cold. Back when the American economy was the most dominant in the world by far, this was apt description of the economic relationship between the U.S. and everyone else.
Today, however, the same might be said about China’s relationship with Africa, and growing fears that China’s economy may be in for a soft patch have caused concerns that if China catches cold, Africa may catch pneumonia.
While China’s economic penetration of Africa has been a leading headline, the assumption that a Chinese downturn will cripple African growth prospects is unfounded.
A slowing Chinese economy does not imply a downturn in Chinese demand for African commodities. Even if Chinese growth slows significantly, perhaps to the low single digits, this will still imply an increase in the aggregated amount of timber, oil, coal, and other such products supplied to China by its trading partners all over Africa.
Chinese investment into Africa, while ultimately dependent on Chinese growth prospects at home, is not strictly dependent on the need for short-term returns and near-term profitability. Many of China’s biggest investments in Africa are directed by Beijing for strategic reasons – principally the long-term acquisition of natural resources required to feed, clothe, power, and house its immense population and growing economy. Since China has long since passed the point where domestic reserves of such resources are sufficient for its needs, it has been forced to elsewhere for what it lacks at home.
Unlike in past decades when Africa’s commodity exporters were largely dependent on the West as an outlet for its products, the rise of China, the rest of industrializing East Asia and, now, India have created competition for what Africa produces. Chinese thirst for oil and hunger for timber and minerals may diminish for a time, but that merely provides an opportunity for resource-hungry investors in the West or elsewhere to take China’s place. China, even in recession, therefore lifts the global price point and basement-level demand for Africa’s commodity exports.
A Chinese downturn will actually have many benefits. True, commodity exporters may be hurt, but the reduction in Chinese demand and the effect it will have on global energy and food prices will make it easier for non-energy exporters – such as Ethiopia or Kenya – to grow. Lower food prices, in turn, will make it easier for Africa’s urbanizing poor to afford their daily bread while also expanding their ability to purchase other goods and services as they find their budgets going farther than they used to.
Most importantly, there is a major argument to be made that the African growth story, while for a long time “made in China,” has nonetheless begun to transition to something much more domestically based. Africans are richer, more connected to the outside world and each other, and, in many countries, peace and a reduction in stifling government interference has created an entrepreneurial class more free to pursue business opportunities than ever before.
While a Chinese economic slowdown will hurt some on the continent, it is not the looming disaster that many make it out to be. Africa and Africans have grown too savvy, and connected to the rest of the world, for that.
