A new World Order


By Lynette Dicey

SA needs to develop its own perspective on China rather than buying into Western narratives. Many of the Western think-tanks focused on China reflect inbuilt biases and hidden agendas thereby prejudging and super-imposing their own world view on what Africa’s relationship with China should be, says investment strategist and futurist at Ninety-One, Michael Power.
All indications are that China will in due course overtake the US as the world’s largest economy. Although the COVID-19 pandemic has slowed growth down for most countries, including China, there are signs that its economic recovery is likely to be faster than most countries. In fact, China is likely to be the only G20 country with a positive GDP outcome for 2020.
Power predicts that the ‘new world’ – Asia in particular – will, after a period of adjustment and recovery post COVID-19, move into a far more privileged space in terms of its standing in the global economy.
SA’s challenge will be to re-arrange and re-orient both its economy and its understanding of this new world order and the fact that the centre of economic gravity is moving away from the West to the East – and an East which will increasingly be centred on China.
In the coming decade, over 90% of middle class growth globally will be in Asia, while middle classes in Europe and the US will decline in terms of their numbers, explains Power. Consumer growth, therefore, will be concentrated on Asia and more immediately, on China.
Prior to COVID-19, Power had predicted that the Chinese economy would overtake the US economy in terms of size in the latter part of this decade, between 2028 and 2030, he says.
The global economic dynamic has already shifted significantly although it is currently reflected more in trade than in finance, says Power. What will gradually change will be the global financial market’s infatuation with the US dollar, a focus which is going to have to expand to include the Renminbi particularly as investment strategies increasingly diversify away from the West to include more exposure to the East.
SA too has had an historic bias towards the West, particularly in the world of finance, which persists to this day. But what SA has failed to understand is just how important the Chinese economy will become in the next decade, says Power.
Africa will continue to be relevant to China, says Power. Not only is the continent an essential link in China’s Belt and Road Initiative (BRI) but it fits into China’s long-term vision. In recent years China’s relationship with Africa has been rebooted. “China no longer brings in unskilled labour, rather employing more locals so allowing for a better meeting of minds and a more balanced relationship.”
Power believes it is in SA’s best interests to deepen its relationship with China in the years ahead. “Currently the relationship is cordial but not warm. China is certainly not falling over itself to invest in SA although they are always happy to trade with SA,” he says.
While China ostensibly has no favourites in Africa and will trade with any nation, Power believes that in reality it favours Eastern Africa over the rest of Africa, primarily for geographic and demographic reasons.
From a geographic perspective Eastern Africa shares many links with Asia, both being littoral to the Indian Ocean. That makes logistical connections easier, he points out. China’s interest in Eastern Africa is resulting in an infrastructure overhaul which includes roads, rail, electricity and hydro power. Kenya and Ethiopia are especially favoured.
“Eastern Africa has had commercial ties with Asia for over a thousand years. This, coupled with the fact that Eastern Africa represents a market of 300 million people and counting given its rapid population growth, makes it a lucrative destination for Chinese products. In addition, the region is starting to offer production facilities which are cheaper than Bangladesh and Vietnam. As such, it seems destined to start producing shoes and textiles for export.”
SA, he says, needs to decide whether or not it wishes to be part of this re-emerging Indian Ocean trading basin.
China’s involvement in Eastern Africa has been well received. “The Chinese have certainly had less push back in this region than that received from SA,” he says.
The popular narrative that China lures African nations into debt traps is, in large part, sour grapes and a Western narrative, maintains Power. “The bottom line is that some African countries have indeed borrowed too much and they will battle to repay their debts, particularly given the negative impact of the COVID-19 pandemic. However, what in all likelihood will happen once a vaccine is available is that China will launch a charm offensive in Africa and offer very affordable vaccines. This will buy China significant goodwill in Africa and ensure that from a geopolitical perspective Africa becomes more geared towards China than to the US.”
– The Daily Mail-People’s Daily news exchange item