A new coupling of Africa and China’s economies is beginning to materialise, suggests Frontier Advisory CEO Dr Martyn Davies.

Addressing delegates at the Mining Indaba in Cape Town 
recently, Davies explained that, in 1996, an economic growth correlation emerged between African and Chinese economies.

“For about a decade and a half, African economic growth has almost identically followed the trajectory of the Chinese economy,” explained Davies.

This corellation is primarily the result of China’s demand for resources and Africa’s ability to supply such commodities.

While Africa is dependent on China’s tremendous demand for natural resources to largely sustain its rising economic growth, Davies argued that Chinese economic growth is equally dependent on Africa’s ability to supply such resources.

Currently, China is Africa’s second-biggest trading partner, 
behind the US, with 80% of African exports comprising natural resource commodities.

Owing to this reliance on African commodities, Davies 
insisted that Beijing still 
expressed high-level political intent to continue investing in Africa, despite the high investment risk associated with many countries on the continent.

This is evidenced by the fact that China plans to spend $1-billion in Africa on commodity and industrial projects by October this year.

Davies elaborated that one of the fundamental reasons that China is investing in, and trading with, Africa is that the continent is the only commodity-rich region that is strategically open for business.

“Ultimately, investing into Africa is believing in long-term China,” Davies told delegates. 

In terms of the Chinese economy, Davies estimated that economic growth will slow to an average of 7,5% to 8,5%.

The slowdown in the economy, which is largely engineered by the Chinese government itself, argued Davies, will bottom-out in the third quarter of this year.

“Economic growth will pick up quite dramatically from the current levels of 6%, but will not 
reach double-digit figures of 13% that we have seen recently,” said Davies.

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