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China Daily Website

Trade between China, Africa strengthening

Updated: 2012-07-19 10:28
By Wang Xiaotian ( China Daily)

Trade between China and Africa, which has risen tenfold in less than a decade, will continue to grow and strengthen, regardless of the toughening conditions in many parts of the world.

But the increasing trade imbalance between the two needs to be addressed, as the continent continues to import Chinese goods in growing numbers.

That's according to Razia Khan, the regional head of research for Africa at Standard Chartered Bank, which has over 160 branches across 16 African countries.

Speaking on the eve of the fifth Forum on China-Africa Cooperation, being held in Beijing, Khan said: "Although China's import growth has slowed and trade with most regions declined this year, its trade with Africa has slowed less 'meaningfully', so in year-on-year terms, China is still trading more with Africa.

"There have been projections that maybe as soon as this year we will reach $200 billion in bilateral trade."

Trade between China and Africa reached $160 billion in 2011, up by 28 percent from the previous year, according to the most recent data released by the Ministry of Commerce. In the past 10 years, bilateral trade has been growing at an average pace of 33.6 percent per year.

Khan said that Africa's economies might be affected by the global economic slowdown, with some lag, but that import demand - especially for manufactured items that China produces - is still very high.

However, she accepted that if the Chinese economy slows to a much lower growth rate for an extended period of time, Africa might be affected.

She added that one of the biggest challenges facing China-Africa trade relations was the current account deficit growing on the African side, mainly due to the too rapid growth of imports from China, but also its weaker historical growth compared with China.

"Of course that isn't a sustainable situation. And definitely that might cause economic dislocation and short-term disruptions in some of the African economies. This is something we have to watch very carefully."

Jeremy Stevens, an economist at the South Africa-based Standard Bank Group, said Africa needs to look at how partnerships with China can further link its economies to global supply chains, and to take a practical approach focusing on carefully chosen sub-sectors, which can leverage the global value chain.

"Rising labor costs and currency appreciation in China alone will not push manufacturing jobs to Africa," he added.

"As much as Africa is importing more high value-added products from China, we need to consider if there is any scope for Africa itself to develop manufacturing of itself," Khan said.

Khan agreed the "nature of the engagement will probably have to deepen and broaden to become more inclusive in Africa as well", adding the upcoming summit between China and Africa is "encouraging" as it will put more concerns of Africa on board.

Stevens said that the summit comes at a time when China is distracted to a degree by domestic economic challenges.

However, he emphasized that Africa is now even more reliant on China, in particular Chinese demand for African commodity exports.

"A changed China demands a different Africa. China is looking at Africa in a new way, and is preparing to demand more meaningful engagement from Africa. Africa, on the other hand, must respond with a multilateral agenda," he added.

He said he considered Africa as deeply relevant to China's next phase of development, and its coping strategy during the tough global economic and financial climate.

The continent is also a fertile market for the renminbi's internationalization, with 36 billion yuan in trade already done in the currency in 2011, Stevens said.

Ishmael Yamson, the chairman of Standard Chartered Bank in Ghana, said that China would face food supply tension in the future, and that the focus of its investment into Africa in the next phase would probably be agriculture.

He said that Africa needs an annual investment of up to $100 billion in the future to maintain sound economic growth, which means there is still much room for China and Africa to strengthen their cooperation in coming years.