As we report elsewhere, the chief executive of one of the Middle East’s major container shippers believes that China’s role in the global economy is weakening as a result of its strict zero Covid-19 policy.
Speaking at DP World’s Global Freight Summit in Dubai, Till Ole Barrelet, CEO of Emirates Shipping Line, said that China’s attempt to stamp out Covid, which includes regional lockdowns and mandatory quarantines for international visitors, is one of several threats to the global shipping industry.
In China, he says, “it’s quite challenging now for the supply side, for factories. You don’t know if you can actually supply your goods tomorrow, or if you’re in a lockdown, whether you have enough workers. This uncertainty is really a key concern for the Chinese economy, and we really hope that there will be a solution soon so that there is more predictability… Buyers can’t go to China, you can’t visit your factories, you can’t visit your supply chains. It’s unpredictable in China right now.”
China’s weakness offers challenges and opportunities for Africa. A China that is distracted by domestic economic concerns and retreats from the global economy will not offer Africa the same level financial and investment support it has so dazzlingly provided over the past two decades.
Lauren Johnston, a professor at the University of Sydney’s China Studies Centre, recently told African BusinessThe initial support for Chinese lending to the continent came from tumbling interest rates after the global financial crisis, and a search of new markets.
This favorable environment is no longer present today, with global interest rates rising. Instead, China finds itself trying to “manage a loan portfolio in the presence of global tensions and post-pandemic economic challenges,” Johnston said.
Africa can expect no more free gifts or grants hidden as loans – as we reported in November, Chinese banks now expect to be repaid in full for loans made to African countries.
“Chinese banks are reluctant to cancel or reduce the principal on bank loans inside China; doing this abroad would be unpopular among Chinese citizens,” Deborah Brautigam, director of the China Africa Research Initiative at Johns Hopkins University, told African BusinessThe same article.
So the days of easy money are unlikely to return any time soon. China’s 2016 peak in African lending was $29.5bn. Analysts already noticed a decrease in financing at the flagship Forum on China-Africa Cooperation.
Supply chain opportunities
But China’s self-imposed isolation from global supply chains gives Africa the chance to step up and boost its manufacturing capacity and productivity.
Barrelet stated that global manufacturing production is already shifting to Southeast Asia. India, Vietnam Thailand, Indonesia and Thailand have seen increased trade volumes due to the Chinese retreat.
Moreover, Barrelet said that Africa remains resilient to global turbulence due to its strong and growing appetite for basic goods, such as customers’ first TVs and fridges. Although the supply of goods to Africa may be decreasing temporarily, there is still a lot of demand. The potential for a large internal market is offered by the emerging African Continental Free Trade Area.
China is retreating from global supply chain networks, so what better way to create an enviable circle than for African producers to step up and produce more basic goods for the continent?
It is is unlikely to happen quickly, and China will long remain a production giant. However, this shift could be beneficial for Africa long after China returns to global affairs. It would create jobs and businesses in Africa, reduce import dependency, and increase domestic spending.
Source: african.business
