WhatwillChina’sG20leadershipmeanforglobalandAfricangrowthfortunes?
ByHannahEdinger
Althoughithasbeennearlyadecadesincetheonsetoftheglobalfinancialcrisis,alackofconfidenceandgeneraluncertaintyarestillsweepingtheworldeconomy.Therecoveryofworldgrowthhasbeensluggishatbest.Worlddemandremainsdepressed.Tradegrowthhasbeenstagnatingasprotectionismhasincreased.Tighterfinancialconditionspersist,andcoupledwithlacklustercapitalflows,M&Aactivitieshavedeclined.Emergingmarketsareperformingbelowtheirpotential,andalowandvolatilecommoditypriceenvironmentinparticularhasseenespeciallyAfricanresourceexportingeconomiesweaken.
AddtothistherecentshockandthepossiblerepercussionsofBrexit,andtheupcomingpresidentialelectionsintheUnitedStates,continueddownsideriskstoglobalgrowthpersist.TheWorldBankpredictsthattheglobaleconomywillonlyexpandby2.4percentthisyear.AreportpublishedbythebankinJune2016notedthat“anotherstretchofmutedgrowth”liesahead.
Aheadofthepack
Chinaremainstheonecountrythatcontinuestosubstantiallyoutperformtheglobalgrowthoutlook.However,China’sowneconomicmetamorphosisfromanexport-ledtoaconsumption-drivenandmoresustainablemodelofgrowthhasputthebrakesonitsthree-decade-longbreakneckspeedperformance.Chinarecorded“only”6.7percentGDPgrowthrateinthefirsthalfof2016.
Astheworld’ssecondlargesteconomy,Chinahasbecomethekeydriverofglobaleconomicactivityanddemandgrowth.Incomparison,theothertwoimportantpillarsoftheworldeconomy-theUnitedStatesandtheEU-haveoverthesameperiodrecordedaboutonefifthandonequarterofthisgrowthraterespectively.
ItcomesasnosurprisethatChinaisincreasinglyexpectedtoassumealeadershiproleintheglobaleconomy,giventheongoingeconomicquagmireinmanyotherimportantcentersofeconomicgravity.
China’shostingoftheG20presidencythisyearisthuswell-timed.ThestagehasbeensetforChinatoshowcaseitsgloballeadershipandthinkingonaddressingwhatarealreadypressingchallengesfacingmanyeconomies.Underthetheme“TowardanInnovative,Invigorated,InterconnectedandInclusiveWorldEconomy,”thecityofHangzhouwillhosttheG20SummitonSeptember4-5,2016.
Expectedoutcomes
AsAfricagoesthroughoneofitsslowestgrowthphasesinthepastdecadeorso,thehostingofthesummitinChinaisalsotimely.Ofthe10keyexpectedsummitoutcomesthatweretabulatedbyChina’sForeignMinisterWangYiearlierthisyear,atleastseveneitherdirectlyorindirectlyaffectAfricaneconomies,whosegrowthtrajectorieshavebecomecloselyalignedtoChina’seconomicfortunes.
Whilesomeoftheagendaitems,suchaspromotingandboostinginternationaltrade(giventhecurrentglobalbacklashagainstglobalization)andcross-borderinvestment,mightcomeacrosstosomeobserversasbeingalignedwithChina’sowninterest,alonger-termsustainablegrowthoutlookforChinawillhaveimportantspilloversforworldcommerce,globaldemand,andAfricaneconomies.
Justasarisingtideliftsallboats,thisgroupingneedstorealizetheimportanceofworkingtogether,ratherthanagainstoneanother,inordertoboostconfidenceandglobaleconomicactivity.PledgesatrecentFinanceMinistersandCentralBankGovernors’Meetingsalreadysupportthisthroughinvestmentininfrastructure,amoreenablingenvironmentfortradegrowth,continuedcommitmentstostructuralreformsandpro-growthpolicies.
HangzhouisreadyfortheG20Summit
HannahEdingerImpactonAfrica
ProposedpoliciesandactionsfromthemeetingwillhaveimpactsonAfricaneconomieslargelythroughtrade,investmentandotherfinancingchannels.China,theUnitedStates,theUKandAfrica’snowagainlargesteconomy(inU.S.-dollarterms),SouthAfrica,areallimportanttradingandinvestmentpartnerstothecontinent.
AsAfricaneconomiesarepricetakersratherthanpricesetters,commoditypriceshocksoverthepasttwoyearshavere-emphasizedtheimportanceofeconomicdiversificationintovalue-addedproductsandserviceexports,bothforsustainingemploymentlevelsaswellasexportearningsduringcommoditycycledownswings.
Thisshouldbedonebothbyembracingandinvestingininnovationinthebusinessanddevelopmentmodelsofcountries,whilepursuingindustrializationstrategiesandenablinginvestments.ThisinitselfisakeyshiftforthemajorityofAfricaneconomies.ThepartnershipofG20economiesinthepursuitofthesenewgrowthmodelscouldprovidebetteropportunitiesforinclusiveandsustainabledevelopmentinAfricaneconomies,ratherthanresource-drivengrowthpaths.
Inthislight,whatisencouragingisthatChinahastabledacooperationinitiativewithAfricatopromoteindustrializationthroughcollaborationoninvestmentandinfrastructureaspartoftheexpectedG20outcomes.ChinathusischampioningcommercialbenefitsanddiversificationprospectsforAfricaneconomies.
ForAfrica,thisbuildsonChina’sforeigncommercialpolicyobjectivesandmeansgreaterprospectsforattractinginvestmentintoinfrastructure(throughtheAsianInfrastructureInvestmentBandandtheBRICSBank)aswellasagribusiness,manufacturingandothervalue-addingsectors.
ItalsoprovidesthepotentialforAfricaneconomiestodeepentheirintegrationintoregionalandglobalvaluechainsasequaleconomicpartners,ratherthanjustresourcesuppliers,asvarioustrans-nationalfreetradeagreementsarelobbiedforapproval,asindustriesemergeinAfricatoservethegrowingdemandofChineseconsumersandasmorerenminbibecomeavailabletofinancetradeactivitiesinthiscorridor.
AlthoughtheG20SummitinHangzhouwillneitherbethesavinggraceofthegrowthfortunesoftheworld,norsolvethechallengesthatAfricaneconomiescontinuetoface,theagreementbyleadersofsomeofthelargestandmostimportanteconomicplayerstocommittochangeisinitselfaboostofconfidence.SotooisChina’schampioningofAfrica’sindustrializationagendaatthedecision-makingtableoftheworld’sleadingeconomies.Goingforward,G20partners’continuedfocusonAfrica’sindustrialambitionscouldgoalongwayforthecommercialdevelopmentanddiversificationofthecontinent.CA
(TheauthorisassociatedirectoratDeloitte.TheopinionsexpressedinthisarticlearepurelythoseoftheauthoranddonotnecessarilyreflecttheviewsofDeloitte)