The Chinese economy may be slowing down in its industrial and manufacturing sectors, but the growth in its consumption and services sector is still adequate to push growth in African countries which depend on trade with China, analysts said Wednesday.
Jonathan Stichbury, the East Africa CEO of Pine Bridge Investments, a financial services advisory and wealth management firm, said despite the talk of a Chinese economic slowdown, the 6.9 percent growth rate recorded by China in 2015 still remains much higher by the Asian regional standards.
"The slowdown in the industrial and manufacturing sectors, along with the over-capacity issues, has been widely reported. The consumption and services segments of the economy, however, have been growing rapidly, with the services now making up more than 50 percent of China's Gross Domestic Product (GDP)," Stichbury told Xinhua in an interview.
Economic growth in Africa is expected to increase to 4.4 percent in 2016 from 3.7 percent in 2015. This is based on increased public investment, services sector growth and increased trade ties with China.
Analysts particularly see the 60 billion U.S. dollars Chinese pledge for multi-faceted cooperation with Africa over the next three years as a major growth driver for Africa. The financing deal was announced at the China-Africa Summit in Johannesburg in December 2015 "The source of the slowdown is that China is currently in transition phase.
It is moving from an economy dependent on the manufacturing sector to one that is dependent on the services sector," said Maurice Oduor, Investment Manager at Cytonn Investment, a regional investment and advisory services firm in Nairobi. It is likely that China will reach a soft-landing where the economy will see medium-high growth, and the process will take place as it moves to expand domestic consumption," he added.
At an average growth rate of 6.9 percent, China's output a year is still the size of the Turkish economy and almost the size of all the African economies combined, according to Adam Elhiraika, the Director of the Micro-Economic Division at the UN Economic Commission for Africa (UNECA) in Addis Ababa. While the Eurozone crisis has been responsible for the most widely felt global trade slowdown in 2015, the slowdown of the Chinese economy is associated with weak demand for merchandise.
China accounted for 12 percent of the global merchandise exports and 10 percent of the imports, according the UN outlook report 2016, which measures economic performance every six months. China remains the top export destination for 29 countries, 13 of which are African countries.
"China has grown to become Africa's single largest trading partner. We have seen trade between China and Africa grow more than 10 times over the past decade," Stichbury said. "It is safe to say that China is having a substantial impact on Africa's economy," he added.
In East Africa, the Chinese impact on Kenya's infrastructure is a major source of economic growth. Chinese companies have been engaged in the building of roads and railway lines to improve the efficiency of the Kenyan economy, Oduor noted.
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