CHINA’S imports from Africa fell nearly 40% last year, officials said Wednesday, as low commodity prices and slowing growth in the Asian giant hit trade.
Imports from the continent fell to 440 billion yuan, some 38% lower than in 2014, China’s Customs administration said.
Natural resources from Africa such as iron ore and oil have helped fuel China’s economic boom, and it became the continent’s largest trade partner in 2009, giving it growing diplomatic influence.
But growth in the world’s second-largest economy has slowed to its lowest since the aftermath of the global financial crisis, punishing world prices for commodities—the bedrock of African exports.
Economists say Chinese growth is becoming less dependent on heavy industry, further hitting demand for raw materials.
However, Chinese exports to Africa rose by about 4% to reach 670 billion yuan, officials said.
Oil exporters are expected to be hit especially hard. China said its imports from Nigeria slumped more than 50% by value last year.
Beijing said in November its direct investment in Africa dropped “more than 40 percent” to about $1.2 billion in the first six months of the year.
China’s President Xi Jinping announced $60 billion of assistance and loans for Africa last month, signalling ongoing commitment to the continent despite the investment drop.
In its new flagship report, the World Bank says China’s slowdown likely contributed to the current economic slowdown in sub-Saharan Africa, where growth fell from 4.6% in 2014 to 3.4% last year.
As a result the development lender called for the continent to develop its domestic capacity to withstand global volatilities, including increasing its manufacturing capacity and bolstering intra-African trade.
Analysts are also increasingly arguing for stronger trade with partners such as India, which sinks more Foreign Direct Investment (FDI) into the continent.
China’s slowdown—officially a rebalancing—is contributing to depressed global demand, with fears of a tough 2016 already rife in policy circles.
The effects on the continent have continued to be felt, but for some African economies, a continuation of China’s reducing demand this year could hit home:
1 | Nigeria
Oil contributes most of Nigeria government revenue, and up to 90% of export earnings. With China, which had become among the biggest buyers of oil in Africa’s top producer, cutting imports by over half last year, coupled with record-low prices, it could all get very tight for the continent’s largest economy.
2| South Africa
On Monday, the currency of Africa’s second-largest economy crashed to a new record low of 17.9169 against the dollar, partly on market turmoil in China, its largest trading partner. Dependent on hard commodity exports, China’s slowed demand has hit the African nation hard, with mines closing and laying off thousands of workers. If the country enters a recession and gets junk status by ratings agencies as is increasingly expected, it only need look East to understand what’s happening.
FDI from China is crucial for Zambia, especially in its mainstay copper industry, of which it sold $4.5 billion to the Asian country in 2013, the bulk of its export earnings. The slow demand hit the country hard, leaving its currency the worst performing on the continent and the second globally in 2015. More pain lurks, the extent of which could decide its August presidential election.
China has been active in its resource sectors, including oil exploration, and is building a host of projects from ports and airports to hydropower and fisheries. China is the West African country’s biggest export market—in 2013 it sold $2 billion worth of iron ore to the Asian giant—or nearly half of its GDP, in addition to sizeable amounts of copper ore. Few track this country, but it may feasibly be one of the most exposed to the Chinese contagion.
In 2012 China imported 14% of its oil from Angola, according to data from the Observatory of Economic Complexity. Angola spent last year in the offices of multilateral lenders, and this month saw its kwanza currency fall the most since September 2001 after the central bank allowed it to devalue as the drop in oil prices cut the main source of government revenue and export earnings.
6| South Sudan
Another country that will be on edge is South Sudan, where oil exports to China were worth $2.25 billion, or a fifth of its GDP, in 2012 before civil war decimated production. This week new data showed its inflation rate climbed nearly 40 percentage points in December alone, as conflict takes its toil on the economy.
7| The two Congos
China is an active participant in the resource sectors of the Democratic Republic of Congo, which has the world’s largest trove of minerals, and in the Republic of Congo which sold nearly $5 billion of oil, or 95% of its exports, to China in 2013.
8| Sierra Leone
The country is only beginning to recover from the effects of the Ebola fever, and has since 2010 seen its iron ore exports grow an astonishing 27,000% in value—the fastest globally. In 2013 it sold $1.2 billion worth of iron ore to China, which accounted for 95% of its exports to the country. So crucial is iron ore to the West African country that before the deadly epidemic its real GDP grew 7%, but if you exclude the ore it was only 1%, according to the World Bank.
9 | Eritrea
Even lonely Eritrea could catch a cold: with a GDP of $3 billion according to the World Bank and few international partners financing is at a premium. But in 2013 it sold $50 million of copper to China—it is valued foreign exchange not to be sniffed at and which if suddenly cut off could further fuel unemployment.
The dampened oil prices have already set off rare political changes in tightly-held Algeria, but the North African country will also be watching the Chinese economy very closely: some $2.17 billion of its petroleum products sales in 2013 were to the Asian country. It is a similar situation in Sudan, where 90% of its crude sales are to China.