China is being touted as one country where the recession has not been able to show its ugly head. But it would be naïve for anyone to comment that the country is unaffected by it. It has the distinct advantage of having huge cash reserves that it has accumulated from its trade surpluses with other countries. The time has now come to utilize them to buy what it could not have afforded a few years ago. Pressure from the country’s think tank and the urge to stay ahead is making it consider the Warren Buffett policy of “buying low”. That is, it can buy assets and companies at their lowest prices. This includes a large number of resource rich assets in the African continent.
The world’s economic activity is going to be led by Asian economies, mainly, China and India, and this is a boon for African nations, as it will boost their export segment due to increased demand for energy, oil, minerals and other commodities. China’s appetite for all these even during the slow down is substantial enough to keep African economies moving forward.
Sub Saharan Africa is witnessing trade improvement in terms of increasing exports to match imports, and this has now to be transformed into development at sustainable levels. The two-pronged strategy, where China can be a significant contributor, involves moving towards industrialization rather than mere import of raw resources, as well as macroeconomic measures to maintain exchange rates which should not appreciate so much that they act as deterrents to exports, which may become less competitive than others in the world market.
In China, the February figures of the purchasing managers’ index (PMI) showed an increase to 49.0 for the third month consecutively. The PMI is a measure of industrial volatility, and is showing signs of gradual recovery in the country. This, along with the much awaited stimulus package being unveiled by the government, should show positive signs of improvement in the economy. The biggest beneficiary of this will be the African nations, which provide raw materials crucial for production and progress to China.
Source : China Africa
