Judging by the deep economic ties China has forged with sub-Saharan African countries over the past 20 years, becoming the region’s largest single country trading partner, the International Monetary Fund (IMF) says the real GDP growth of major economies on the continent are now at risk.
China is believed to buy one-fifth of the region’s exports—metals, minerals, and fuel—and provides most of the manufactured goods and machinery imported by African countries.
In a piece jointly authored by Hany Abdel-Latif and Michele Fornino, economists in the fund’s African Department, where Wenjie Chen, a deputy division chief and Henry Rawlings, a research assistant, noted that a “one percentage point decline in China’s growth rate could reduce average growth in the region by about 0.25% points within a year, according to the latest Regional Economic Outlook. For oil-exporters, such as Angola and Nigeria, the loss could be 0.5% points on average.
They noted that “with geoeconomic fragmentation on the rise, sub-Saharan African countries will need to adapt to China’s growth slowdown and declining economic engagements by building resilience through increased inter-African trade and by rebuilding buffers, including through tax policy reforms and improvements to revenue administration.
“Efforts to diversify African economies are also vital to sustain future growth, as well as “the strong demand for minerals that support renewable energy development could provide an opportunity for countries to forge new trade relationships and develop more local processing capabilities.”
They urged countries in the region to “improve their competitiveness by creating a favorable business environment, investing in infrastructure, and deepening domestic financial markets.”
China’s recovery from the pandemic is believed to have slowed recently due to a property downturn and flagging demand for its manufactured goods as global growth has also slowed.
The ripple effects of China’s slowing economy can be seen in the fallin sovereign lending to sub-Saharan Africa, which fell below $1bn last year—the lowest level in nearly two decades.
Chinese loans to the region rose rapidly in the 2000s, with the country’s share of total sub-Saharan African external public debt jumping from less than 2% before 2005, to 17% by 2021.
This, the IMF added, makes China the largest bilateral official lender to countries in the region. However, the share of debt owed to China remains relatively small, at just under 6 percent of the region’s overall public debt and is mostly owed by five countries—Angola, Cameroon, Kenya, Nigeria, and Zambia.