“I want everybody playing in Africa,” President Obama said on Saturday in Pretoria, South Africa, during his just-concluded three-nation tour of the continent. “The more, the merrier.”
The American leader made no direct reference to anyone as he spoke those words, but everyone knew whom he was talking about. After all, his visit, as the journalist Peter Bergen put it, was just about one thing. “There is a one-word subtext to President Obama’s trip to Africa: China.”
According to the US Government Accountability Office, China surpassed America as Africa’s largest trading partner in 2009. Three years later, Chinese two-way trade with African nations amounted to $198 billion, about double ours. And the future looks bright for the Chinese. Projections put China’s African trade at $325 billion just two years from now. It was only $11 billion in 2000.
Nobody believes America can grow its trade with Africa as fast as China will. Yet China has just about hit high tide on the continent, and there are three principal reasons why, despite the prevailing skepticism, America could regain its lead from the Chinese over the next several years.
First, China’s economy, after 35 years of virtually uninterrupted growth, is exhausted. The series of Chinese liquidity crises in June is only the most visible result of the country’s long-term down cycle. Manufacturing, the source of China’s decades-long ascent, is already in distress. On Monday, the HSBC Purchasing Managers’ Index showed continued contraction of the factory sector last month, the largest portion of the Chinese economy. This widely followed indicator is in line with China’s disastrous import and export performance in May. According to official numbers, exports increased by just 1.0 percent from the same month last year. More important, imports, a sign of domestic demand, fell 0.3 percent. This year, commodity prices have been tumbling across the board because of falling Chinese requirements.
Chinese enterprises have signed up resource-extraction deals across Africa, but technocrats in Beijing have undoubtedly overestimated their country’s needs over the long-term. So look for the Chinese to begin dumping excess commodities on global markets—and reneging on their overly ambitious deals on the continent. China’s Africa trade numbers should fall accordingly.
Second, American business is realizing that Africa is, as President Obama put it, “a continent full of promise and possibility.” After all, the president took about 500 business figures with him to Africa, home to six of the ten fastest-growing economies on the planet, including the top three: South Sudan, Libya, and Sierra Leone. Africa is, at least from the perspective of economic growth, the new East Asia.
The president’s new $16 billion “Power Africa” initiative, announced in Cape Town on Sunday, and his “Trade Africa” plan, released on Monday in the Tanzanian city Dar es Salaam, mean that companies like General Electric and Texas-based Anadarko Petroleum will be doing much more business there.
Third, Africa is reevaluating its new best friend. “So China takes our primary goods and sells us manufactured ones,” wrote Lamido Sanusi, governor of the Central Bank of Nigeria, in a much-discussed piece in the Financial Times in March. “This was also the essence of colonialism.” (Read more about this in “The New Imperialism,” March/April 2011.)
Not surprisingly, Xi Jinping was on the defensive during his March trip to the continent and ended up admitting that Sanusi was on target. “China frankly faces up to the new circumstances and new problems in Sino-African relations,” he said in a speech in Dar es Salaam. “China has and will continue to work alongside African countries to take practical measures to appropriately solve problems in trade and economic cooperation so that African countries gain more from that cooperation.” Xi can deliver applause line likes this only so many times before African policymakers hold him to them.
China has had a great run in Africa since the turn of the millennium, but now the economics of its relationship with the continent will begin to adjust.