Saturday, July 21, 2018

Update On China/Africa Relations

While chatting with a well-traveled friend the other day she expressed how amazed she is by all of the Chinese investment she's seeing in Africa. "China is pouring money into Africa", I believe is how she put it. So what does that mean? Well, it means China is investing heavily outside its borders, which to some degree involves offshoring manufacturing to Africa (and other places); which means Africa (and other emerging countries) are picking up the manufacturing mantle as China moves further toward a services-oriented economy (like ours), while taking full advantage of the cheap labor and natural resources the developing world has to offer. 
Consider how cozy Africa (as well as the other economies China is actively reaching into [India, for example]) -- with its population (human capital) and natural resources -- is feeling toward China right about now.
This morning's news:
The Central Bank of Nigeria sold yuan for the first time as it looks to boost commerce between China and Africa’s biggest oil producer and reduce the dominance of the dollar as a trading currency.
Governor Godwin Emefiele granted approval for the auction to take place on Friday...
While the central bank didn’t state the size of the sale or the exchange rate, allocations will be for businesses importing raw materials and machinery, one of the people said.
The auction comes after Nigeria and China signed a naira-yuan currency swap worth the equivalent of $2.4 billion in May. Emefiele said the three-year deal would help increase trade and reduce pressure on the naira-dollar exchange rate by weaning Nigerian importers off the greenback.
Giving companies access to yuan may make it easier for them to do business with China...
Note: Aside from the obvious takeaway from this blog post, the other message is that clients should expect to hear more from us in the years to come about Africa's budding investment opportunities. 

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