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Cape Town – Trade between East Africa and China is expected to boom over the next five years despite a slowdown in the world’s second largest economy, IHS said on Wednesday.
Trade between East Africa and China is expected to increase by 91% by 2020, according Krispen Atkinson, principal analyst at IHS Maritime & Trade.
“It’s all around manufactured goods. East Africa is becoming a new hub for the Chinese,” he said.
IHS’s projections came as the Chinese market experienced extreme market volatility since a huge debt-fuelled rally, which saw the market rise 150% in 12 months, collapse in mid-June.
The Chinese leadership has made public its commitment to develop infrastructure and to promote regional integration in East Africa, according to Atkinson.
The highest growth areas are expected to incorporate Malawi, Mozambique, Zambia, and Zimbabwe.
IHS risk analyst, Natznet Tesfay, foresees that China’s relationship with East Africa will change in the coming years.
According to Tesfay the current focus is on importing raw materials and exporting manufactured goods.
But, Tesfay added, Chinese investments in regional interconnectivity will enable it to take advantage of comparatively lower operational costs.
Another spin-off will include the increased capacity of onshore manufacturing activity in the region, Tesfay said.
Trade from China and Southeast Asia to North America and Europe is also expected to boom in the next five years, according to the analysis.
Atkinson said, however, that the increases would not be the double-digit rises seen before the 2008 global economic crisis.
“However, an increase of over 30% in the next five years underscores China’s intent to remain a new trade hub-and spoke lynchpin for the rest of the economic world, cementing the Maritime Silk Road Initiative via China and Asia within the emerging market universe,” said Atkinson.
