China's economic rebalancing from an investment-led to a more consumer-led economy presents serious risks for sub-Saharan African (SSA) countries, but also some opportunities, says Standard & Poor's today in the report "For Sub-Saharan Africa, China's Rebalancing Poses Risks And Opportunities".
Many SSA countries have grown strongly on the back of China's boom over the past two decades because it exported commodities such as metals and oil to feed China's rapid investment expansion. But now that China's economy is rebalancing away from investment and exports toward consumption, this could have significant consequences for commodity markets and SSA commodity-producing countries, the report says.
"These risks relate first to the timing of the adjustment in China," said Standard & Poor's EMEA chief economist. "A rapid shift could cause a steeper decline in China's overall GDP and import growth rates, leading to a fall in SSA commodity exports to the country."
The risks also relate to the changing composition of China's imports, the report says. The boom in capital spending, especially in infrastructure and construction, led to a particularly strong increase in imports of metals and minerals. Those countries likely to be most affected by the shift to a consumer-led economy are therefore the Democratic Republic of Congo (DRC), Zambia, and South Africa, the main SSA exporters of mining commodities.
Conversely, exporters of agricultural products, such as Ghana and Congo, may not see much of a change, and could even benefit from the Chinese transition. Oil exporters--Congo, Nigeria, Angola, and Cameroon--could also be less affected in the short term, in our opinion, because Chinese demand for energy products will continue to be underpinned by the growth in its domestic auto market.
"Nevertheless, we anticipate that China's rebalancing will also offer new opportunities for SSA economies that are able to expand their consumer goods exports," said Mr. Six. "South Africa is an example of an economy that has succeeded in increasing its exports of consumer goods, especially to China, in recent years."
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