Abstract
Shocks to aggregate commodity demand from China are having significant impact on global commodities and commodity prices. Fears persist that the economic slow-down in China might be steeper and more chaotic than anticipated and reported, as China rebalances its economy thus impacting on growth prospects across world economies. Using a scenario analysis technique, this study evaluates a risk scenario if economic growth in China falls to 4 per cent rather than the projected 6.5 per cent and its associated impact on African economies. The impact of China’s economic slowdown on African economies from an export perspective shows that there is an urgent need for African countries to undertake structural upgrading and diversifica-tion of different sectors of the economy with particular emphasis on agriculture in order to mitigate reduced demand from China.
Highlights
China has within the past two decades emerged as an influential and major player in the global economy
The effect of China’s deceleration on non-commodity exporting countries and countries with less economic exposure to China will be marginal, though lower commodity prices might indirectly impact on their public finances due to China’s influence on global commodity prices
If China depreciates its yuan in its attempt to drive exports and more importantly, weaken confidence, which has a huge impact on the global economy, as observed in 2008 where weakened confidence brought down companies, banks, markets and financial systems in non-commodity economies and countries
Summary
China has within the past two decades emerged as an influential and major player in the global economy. It is the world’s largest exporter of goods, the largest importer of commodities (see Figure 1), the most significant manufacturing economy and the largest trading nation. For these reasons, the country plays a primary and significant role in international trade. Since 2001, China’s impact on the world commodity market has made it a significant driver of global demand, as its percentage of world’s total import rose from 6.5 per cent to 13.7 per cent in 2014 (see Figure 2)
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