By Nicholas Norbrook | From The Africa Report

It has no precedent in human history: the emergence of hundreds of millions of people into industrial-era jobs and living standards. It was the result of 40 years of 10% growth since the death of Mao Zedong in 1976. The last time a continent-sized country industrialised this successfully – the United States – the number of people involved was in the tens of millions.

Inevitably, a tectonic movement of this size caused shakes, tremors and a tsunami of investment into commodities to keep pace with the Chinese dragon’s appetite. A good chunk of this money has helped transform African economies over the past decade. But, like all good stories, the China resource bonanza has a twist, and it is worthy of Oscar Wilde.

In Wilde’s The Picture of Dorian Gray, the protagonist stays blemish-free while, hidden away in an attic, his true likeness grows disfigured. Certain African countries may suffer the same affliction: happily surfing on a decade of sky-high commodity prices while not getting down to the hard work of transforming their economies. These are the countries who will catch a cold when China sneezes. In the euphemism of International Monetary Fund (IMF) boss Christine Lagarde: “We are concerned about their capacity to buffer shocks.”

There will be winners

China’s slowdown may be devastating to Africa’s commodity exporters – like South Africa, Zambia and the Congos– but it is prompting countries such as Ethiopia, Morocco and Rwanda to take economic restructuring seriously. Those African governments that back their farmers and map out credible industrial policies could benefit hugely as China rebalances from investment to consumption.

When China’s stock exchanges swooned earlier this year, a veil fell. The dragon, believed to be hale and hearty a few years ago, was spluttering. Growth rates have fallen for the past five years, and the official 7% rate target for this year might not be met. Given its level of development – Chinese gross domestic product (GDP) per capita is $7,500 – the government’s debt levels are uncharacteristically high and the population is uncharacteristically old.

But China remains the world’s second-largest economy, with its GDP of more than $18trn. Even 3% growth would in- crease China’s GDP by $540bn per year, the equivalent of adding a Nigeria to its national production. Former African Development Bank (AfDB) president Donald Kaberuka snorts: “I don’t believe the doom and gloom narrative over China and commodities.”

Wages in China are still rising, and the current economic malaise may even have its upside. Jule Treneer of investment fund Madrona Partners suggests that Beijing’s planners actually welcome the slower growth rate. They may be “looking to limit investment growth in the cash-guzzling state-owned enterprises and inject some market discipline”.

But it is unlikely that China’s growth will ever be so commodity-intensive again. As a result, the bankers at Goldman Sachs slashed their copper price forecast by 44% through 2018. The price of oil, which has defied gravity for so long, seems irrevocably dampened by Iran’s re-entry into the market, while any upward movement of the price is likely to reignite the US shale oil sector, another price dampener.

Read the original article on The Africa Report