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The Current Economic Situation in China and the New Opportunity for African Development
By Mr. Liu Kan, Consul General of China in Lagos
2016/03/19

 

When global economy experiences deep adjustment and low growth, as world’s second largest economy, China’s performance on economy draws great attention of all relevant parties. In 2015, the gross domestic product generated by China grew by 6.9%, and this was the first time that Chinese economic growth rate was below 7% in the past 25 years. In addition, given the recent dramatic fluctuation of global stock and foreign exchange markets, some pessimistic arguments appear with bearish sentiment towards the future of Chinese economic development, and there are even arguments that Chinese economy leads to global economic slump. I believe some people draw these conclusions out of worry and good wish, hoping that Chinese economy will continue to be the engine of global economic growth. Some, I think, are conclude based on prejudice and cannot see the wood for the trees. And a possibility cannot be ruled out that someone trying to intentionally overstate difficulties China is facing and discredit the positive role China plays in global economic development.

In my opinion, a rational and correct conclusion can only be reached when Chinese economic growth is analyzed from global perspective. Against the global backdrop of deep economic adjustment, drop of international trade, increasing financial risks and weak economic growth, Chinese economy cannot remain intact. But even in this global situation, Chinese economy still kept growing at medium to high rate. The data from IMF shows the global economy produced 73 trillion USD in 2015, to which China contributed 15%. In 2015, Chinese GDP increased by 649 billion USD, which is equivalent to the GDP of a large developing country. Contributing to 25% of global economic growth, Chinese economic performance is really remarkable.

Of course, Chinese is facing some problems, such as how to reduce excessive production capacity, lower cost of enterprises, destock in real estate industry and prevent financial risks.

To correct the imbalance between supply and demand in the economy, Chinese government has set forth supply-side structural reform based on five clear development concepts: innovation, coordination, green development, opening-up and inclusiveness. China will promote sustainable social and economic development through cutting production capacity, destocking, deleveraging, reducing costs, shoring up weak area in economic growth, of which cutting production capacity will focus on reducing excess production capacity, promoting the upgrading of traditional industries and supporting new industries, new forms of business operation and new models.

As the second largest economy in the world, China is still the main source of momentum of global economic growth, and will bring about new opportunity for African development. I base my conclusion on the following reasons:

First, China is still the largest purchaser and consumer of bulk commodities in the world. In 2015, the value of import by China decreased, but the main reason is the drop of price of bulk commodities in the world market. The average price of crude oil imported by China dropped by 45.3% year on year, while the volume increased by 8.8% in 2015. The volume of ore imported by China increased by 2.2%, mineral and chemical fertilizers by 16.6% and natural and synthetic rubber by 15.3%. Many African countries, including Nigeria, are important suppliers of bulk commodities in the world, and Chinese economic growth will continue to be a huge market of bulk commodities for African countries.

Second, overseas investment by China has kept growing for 13 successive years at the average annual rate of 33%. For the past several years, the pragmatic cooperation between China and Africa in all fields has developed fast, and the direct investment by China in African has increased rapidly, covering manufacture, mining, transportation, agriculture, forestry, animal husbandry and fishery. But, compare to the countries which have long history of cooperation with Africa, such as UK, France, the US, and those whose cooperation with Africa grew dramatically in recent years, such as India, Brazil and Turkey, China’s direct investment in Africa only ranks 7th in the world. The accumulated amount of Chinese investment in Africa accounts for only 3-4% of the total global investment in Africa and 3.7% of total overseas investment by China in the world. China-Africa cooperation still has huge potential and broad prospect. At the Johannesburg Summit of Forum on China-Africa Cooperation, Chinese President Xi Jinping announced the “Ten Cooperation Plans” which would be carried out by China in Africa in next 3 years. Not only do the “Plans” cover industrial cooperation, such as railway, highway, airline, industrialization, but also three fields concerning people’s wellbeing, they are food and clothing, employment and public health, which African people care about most. Aiming at breaking three bottlenecks of development namely poor infrastructure, lack of talents and shortage of capital in Africa, the “Plans” highlight the nature of mutual benefit in China-Africa cooperation. Chinese growth will bring about new development opportunity for African countries including Nigeria.

Third, the international production capacity cooperation advocated by China will bring new opportunity for industrialization of developing Countries including Africa. China undeniably has excess traditional production capacity, but also has advanced and advantaged production capacity to complete construction in large scale with quick speed, and offer high performance-price ratio in equipment cooperation, which make Chinese Companies a better performance on Cost Control. Last year, in order to strengthen bilateral and multilateral cooperation, China signed agreements on international production capacity cooperation with 17 countries and carried out preliminary discussion with ASEAN, AU, EU and CELAC on promoting production capacity cooperation in relevant countries. Upholding equality and mutual benefits, openness and inclusiveness, these cooperation,which meet the needs of development of both China and other countries,are conducive to accelerating the recovery of world economy and will bring new opportunity to industrialization of African countries.



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