The Minister-Counselor in the Embassy of the People’s Republic of China, Mr Gou Haodong
By ANZETSE WERE
In Summary
- Chinese president warned against protectionism at the World Economic Forum.
The President of the United States, Donald Trump,
made it clear during the campaign trail and his inauguration speech that
from now on it is ‘America First’. He wants to build America, hire
American, sell American and buy American.
Many are bracing for protectionism from Trump and even a
trade war. In Africa, we’re looking at the developments in the USA with a
mixture of amusement and concern.
How will Trump’s administration affect AGOA? Will a
Trump economy negatively affect remittances from the African Diaspora?
To what extent will FDI from the US into Africa be affected as investors
scramble to adjust to policy action? Will Trump’s insularity be
reflected in US support to Africa’s economy?
China is cognisant of the global havoc being
wrought by Trump and the lacuna in global leadership he is creating
through the singularity of his ‘America First’ rhetoric. China is aware
of the fact there will be economic implications that will affect it
during the Trump era.
China may lose out on investment that had targeted the country in the context of global value chains.
The Harvard Business School makes the point that
major global manufacturers worry that Trump’s new policies (such as the
introduction of 20 per cent border tax) could disrupt their global
manufacturing plans, which have been carefully constructed to optimise
the efficiency of their supply chains based on free trade policies.
If the tax is effected, calculations may dim
China’s prospects of continuing as the world’s factory. On the other
hand, China may benefit from Trump’s insularity and take advantage of
the weakened presence of the US in the global economic arena.
Perhaps this informed the speech made by the
China’s leader Xi Jinping during the World Economic Forum where he
stressed that pursuing protectionism is just like locking one’s self in a
dark room; he supported continued globalisation.
So what does this all mean for Africa? Firstly,
Africa should prepare for a China that seeks to take the reins of the
world leader both economically and politically.
Africa should expect China to more aggressively
engage in consolidating its economic strength and influencing global
trade rules and dynamics to its advantage. There is a sense that Trump
does not really understand the continent and is still trying to figure
out the best course of action in Africa.
That said, Trump’s does have a Sino-phobic trade
advisor, Peter Navarro, who is of the view that China dominates the
continent and is locking out the US.
Time will tell whether such sentiments will
translate to determined action from the Trump administration in Africa
or not. What is clear is that China is likely to be willing to step up
its activity in Africa as the US figures out its strategy.
And once a Trump strategy for Africa is developed,
China will analyse the trade, investment and financial gaps in the plan
and act to further consolidate its dominance on the continent.
The truth is that Africa’s economy continues to
grow (albeit more slowly) and Africans are slowly getting richer. China
is aware of this and will tenaciously expand its presence in African
markets.
It will be very difficult for the Trump
administration to reverse this momentum if its isolationist rhetoric is
anything to go by.
Additionally, given Trump’s border tax threats,
Africa should expect a more aggressive continuation of China’s entry
into African manufacturing.
The Washington Post makes that point: that in terms of low-end manufacturing, what was ‘Made in China’ is now ‘Made in Africa’.
Chinese factories are already moving to Africa and
Trump may incentivise the relocation of labour intensive manufacturing
from China to Africa where wages are cheaper. Thus, in trying to protect
America, Trump’s policies may push China further into Africa.
Time will tell whether Trump is truly serious about China; and Africa will be at the centre of the action.
Anzetse is a development economist.anzetsew@gmail.com
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