China’s economic malaise and how it will impact on African countries
With China’s Central Bank making Tuesday (15 August) its largest interest-rate cut since the pandemic and news that its economy has fallen into deflation, the implications of this economic instability in China could have repercussions for Africa, experts warn.
China’s National Bureau of Statistics (NBS) said Tuesday (15 August) it would stop releasing youth unemployment numbers, after joblessness among 16-to-24 year olds spiked to 21% in June, and Beijing reportedly told Chinese economists not to discuss deflation or faltering growth.
Some Western economists have criticized China’s latest strategy of hiding unflattering key data, seeing it as an attempt to pretend its economy is doing OK. JPMorgan strategists recently warned that China could stagnate in a similar manner to 1990s Japan, as the US President Joe Biden referred to China’s economy as a “ticking time bomb”. Against this backdrop, experts now discuss what deflation and economic instability in Africa’s biggest export market could mean for the continent.
NBS’s latest, worrying figures have showed that the consumer price index fell by 0.3% in July and factory gate prices dropped by 5.4% in June, the fastest rate of depreciation in over seven years. So how could China’s economic malaise impact Africa? African commodities exporters with large exposure to China, such as Zambia and the Democratic Republic of the Congo (DRC), are likely to be hit hardest but the impacts elsewhere could be less disruptive.
In 2021, Zambia sold $1.64bn worth of copper to China – with the commodity making up 70% of the country’s total exports, which makes the southern African country “hugely exposed” to Chinese demand for its commodities, according to Carl Mbao, managing partner at Frontier Capital Partners in Lusaka. Weaker demand from China and depressed prices on global markets could significantly impact exporting activity and revenue for these countries. After all, commodity prices have already declined on global markets in response to China’s deflation news.
