By Morgan Winsor | From IBT
Panicked investors in Africa joined those in Asia, Europe and the U.S. in a global sell-off Monday, as fears of a Chinese economic slowdown reached commodity-linked African currencies. While the concerns rattled markets around the world, sub-Saharan Africa looked particularly vulnerable after China’s benchmark Shanghai composite index recorded its steepest single-day slump in eight years.
In recent decades, China has turned to oil-rich Africa amid a need for resources to fuel its own economic growth. As part of valuable trade deals, China has helped Africa develop its burgeoning oil sectors and tap its raw materials. But these relationships could be at risk if China’s economy crashes and curbs the flow of cash.
Signs of China’s slowing growth have already put Africa’s economic outlook at serious risk and hit African nations that rely on China as a major business partner. Further economic weakening could curtail Chinese investment growth on sub-Saharan African exports, mining and infrastructure, experts and market analysts say.
“It’s a difficult day all over. I doubt that Africa can escape the impact,” said Amadou Sy, senior fellow and director of Africa Growth Initiative at the Brookings Institution, a think tank in Washington, D.C. “To me, it’s really important to separate the short-term impact from the real question: Is China really slowing down?”
The record trading day in China, dubbed “Black Monday,” and escalating fears over an economic downturn further wounded currencies in South Africa and Zambia as their exports of gold, wine and copper have become cheaper. Many sub-Saharan African currencies are tied to the value of their commodity exports, which began to weaken earlier this year when China missed its official economic growth target.
Read more at IBT
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