What do China's new economic plans mean for Africa?

Last month the Central Committee of the Communist Party of China (CCP) laid out the country’s socio-economic blueprint for the next five years. As China’s 14th five-year plan, this particular one marks an important transition from China’s first to its second centennial goal. Ahead of next year’s Forum on China and Africa Cooperation (FOCAC), hosted by Senegal, it is worth examining the difference between the two centennial goals, and what that could mean for Africa’s own development prospects.

China’s First and Second Centennial Goals

The CCP was founded on 23 July 1921 and went on to establish modern China, as the People’s Republic of China, on 1 October 1949. It has set two important political economic milestones around the one hundred-year anniversaries of these two occasions, which are known as the first and second centennial goals.

The first centennial goal (FCG) aims to see China build a “moderately prosperous society” in all respects by 2021. This means that no person in China should be living in absolute poverty by 2021. Since 1980 almost 900 million people have escaped absolute poverty in China and those remaining in poverty are the focus of a final all-out effort in China over these last months of 2020.

The second centennial goal (SCG) aims to see China “build a modern socialist country that is prosperous, strong and culturally advanced and harmonious” by 2049. In practical terms, this means that by mid-century China’s economy will have reached the frontier in technology and science, and its citizens will be well-off.

A Green and a Grey New Deal

A simplified way to understand China’s second centennial goal uses two concepts: that of the idea of a Green New Deal and also a Grey New Deal, with Chinese characteristics.

A Green New Deal underpins China’s economic development goals: the push to realize the frontier of industry, agriculture, defence, and science and tech. In other words, over the coming few decades we can expect China’s contribution to science and products used in our daily technology-driven lives to rise significantly.

Unlike industrial gains of the past, China’s approach will be especially focused on areas that produce energy and other sustainability-related breakthroughs. New energy transportation and energy-related inventions, and artificial intelligence applications that help improve efficiency and productivity might be expected.

Only with such innovation success will China be able to stay on track to meet President Xi Jinping’s 2020 promise to a UN gathering that China’s carbon emissions will peak before 2030 and that the country will be carbon neutral by 2060. Only this way can so many more hundreds of millions of people sustainably join those already enjoying high-income standards of living.

The trends underpinning a “Grey New Deal” will help. In particular, the promise to hit peak carbon before 2030 will be helped by the fact that China’s population will also peak before 2030. Here the tie-in between the Green and Grey New Deal becomes more evident.

A Grey New Deal caters to the fact that during the 2020s China’s population is not only moving into a much more intensive phase of population ageing, but will also begin to decline.

The first age-related turning point is expected in 2022, when China’s population share of persons aged 65 and over will reach 14%. After crossing a 7% population share threshold, a population is considered "ageing"; at 14%, it is considered to be "aged". By 2033, the level will reach 20%, whereby a country is considered to be "super-aged".

For China, as with its rapid economic growth, the ageing of the population has happened more quickly than in countries that aged earlier. On the other hand, following the implementation of strict family planning restrictions in the 1980s, China also took a very proactive approach to the mutual dependence of economics and demography.

The most recent formalization of this is the medium and long-term plan for responding proactively to population ageing, released in 2019. The plan establishes that by 2022 China’s institutional framework for addressing population ageing should be in place, and that by the middle of the century – the end of the SCG – that framework should be mature.

Within those overriding goals, the plan has five key areas:

1) improving national income distribution by increasing the level of payouts and sustainability of the social security system;

2) improving the effective labour supply in an ageing society via better quality jobs and life-long learning;

3) implementing high quality health and health-related education services;

4) enhancing the application of technology, including assistive technologies;

5) fostering a social environment in which senior citizens are cared for and their rights are protected.

The Grey New Deal has two components. The first is ensuring that the needs of the aged are met to a high standard of quality. The second is effectively responding to demographic shifts not only to accommodate them but also to make use of them.

China’s Second Centennial Goal and Africa

From the mid-1990s until the financial crisis of 2008 in particular, China’s extraordinary demand for commodities – oil in particular – generated a boom time for many of Africa’s resource-rich countries. The same era was less ideal for Africa’s own resource importers, for which China as factory-of-the-world produced a double whammy: a higher energy bill and extreme competition in labour-intensive, low-wage industrial sectors. The good news is that it is probable that the arrival of the SCG era is better news for the sustainable development of African economies.

The opportunities, however, will be lumpy. For example, not only is China’s population expected to peak this decade, but so is China’s oil demand. Hence, where recent decades have been very lucrative for selective oil exporters in Africa this may not continue into the long-term.

For countries such as Angola and Gabon, which sell more than one quarter of their total national exports to China, diversification is key. On the other hand, for African countries short of electricity supply but rich in renewable energy potential, China’s Green New Deal may be an opportunity for a timely and sustainable win-win – and one that helps African countries leapfrog the world’s earlier dirty model of development.

For Africa’s net resource importers such changes may be better news, when combined with China’s increasing loss of low-wage labour over the coming years especially. In theory, that is, it is such economies – especially those on the coast, such as Kenya – that are best positioned to push forward their own industrial sector, alongside services and agriculture. Indeed, under its Belt and Road Initiative and the current five-year plan, China is interested to invest in such sectors in Africa and beyond.

On the other hand, rapid ageing in not just China but also major economies like Japan and Germany is pushing a dramatic intensification of automation and digitization. The net effect of these shifts on the prospects for a new wave of labour intensive, manufacturing-led development in Africa remains uncertain. Equivalently, the net effect of population ageing in these major economies on demand for labour-intensive products is also likely to be negative. On the other, the trends overall may open up new development pathways again. With a new set of conditions, there will also be new opportunities.

Turning China’s Second Centennial Goal into an African goal

Independent of China’s Second Centennial Goal, Africa, under the African Union, has its own mid-century development goal – Agenda 2063. Recent developments, including the African Continental Free Trade Agreement, are intended to foster that long-run development agenda.

China’s interest in African development helps us to understand China’s own trajectory, as well as that of the broader world economy. Africa’s development trajectory over the coming decades – unlike the recent past – will need to take advantage of not just China’s but global Grey and Green New Deals.

At the same time digitization and global technological and health-related public and private goods are constantly emerging. Whether and how African nations tap into China’s SCG-related educational, technological, healthcare and sustainability gains, and the potential demand effects of probable Chinese income gains over the next decades, is yet to be decided. Senegal hosting the Forum on China and Africa Cooperation next year – a first for West Africa – will reveal the first major steps in that direction.