China not to blame for weaker emerging markets

By Zhang Lulu
0 Comment(s)Print E-mail, October 19, 2015
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China should not be blamed for the weakening economic growth in the world's emerging market, said former Kenyan Prime Minister Raila Odinga. Speaking in Beijing on Sunday, he said the economy in his own country was still healthy despite slower development this year.

Former Kenyan Prime Minister Raila Odinga during his interview with on Oct. 18, in Beijing. [Photo by Yang Jia/]

Former Kenyan Prime Minister Raila Odinga during his interview with on Oct. 18, in Beijing. [Photo by Yang Jia/]

"Shocks" to Kenyan economy, but no "collapse"

Earlier this month, the Kenyan government trimmed its GDP growth prediction for this year from 6.5 percent to 6 percent. Growth was 4.4 percent and 5.5 percent respectively in the first two quarters.

An array of factors impacted growth of East Africa's biggest economy, the former Prime Minister explained, including external debt, falling commodity prices, and flagging tourism due to terrorism-related security concerns. Thus the country is "unlikely" to deliver even on the six percent target, he said.

Meanwhile, the Kenyan shilling has fallen more than 10 percent against the US dollar so far this year, and two banks, one middle-sized, have been put under receivership, triggering concerns about the health of the financial sector.

"Every economy goes through some kind of shocks generally, and I think it's Kenya's turn." Mr. Odinga said, arguing the suspension of some particular banks was "unlikely to cause a banking and financial crisis."

Despite unlikelihood of achieving a six percent growth this year, he was convinced the economy could grow around five percent and will "improve next year".

Kenya's economic strength lies in its service sector, infrastructure development, agriculture, and tourism and industrialization which are to achieve their full potential, Mr. Odinga explained. Some major infrastructure projects are underway across the country, which are "likely to fuel the economy in the coming years."

"I don't see that Kenya facing an imminent collapse…I think the economy is still healthy." he said.

"Vibrant" ties with China

Trade and investment between China and Kenya have seen record growth in recent years. According to data revealed by the Chinese Ambassador to Kenya last February, bilateral trade between China and Kenya rose 53 percent to a record high of more than US$5 billion in 2014, and agreed investment increased 10.2 percent to US$592 million, making China the largest trading partner and source of direct investment in Kenya.

"The relationship between China and Kenya is vibrant, and is moving pretty well," the former PM said, noting that Chinese companies are active in Kenya while the government had provided Kenya with technical and financial support, and more and more Chinese tourists are flocking to the country.

Among the ambitious projects being carried out is a railway linking the capital Nairobi with port city Mombasa. A deal, described as the biggest infrastructure project since independence in 1963, was inked last year when Chinese Premier Li Keqiang visited Kenya. The Premier proposed several areas for cooperation, including agriculture, infrastructure construction, industry cooperation and technology transfer, and renewable energy, matching Kenya's developing priorities.

China's growing presence in Africa has been read by some Western countries as an effort of making inroads into the resource-rich continent, but Odinga, who held the Energy and Roads, Public Works and Housing portfolio prior to becoming Prime Minister, dismissed the idea.

"Our relationship with China does not involve exclusion of our traditional partners in the West, but China is helping Africa develop in areas where the West has stopped support, particularly in infrastructure development," he said, adding that any countrywilling to offer support in those areas, including China, was welcome.

China not to blame for weaker emerging markets

Emerging market countries, including Kenya, have seen weaker economic growth, a free fall in domestic currencies, and considerable outflow of capital this year, which have been attributed by some to a sluggish growth in China; however, Mr. Odinga argued China was not to blame.

African countries have indeed felt the brunt of the slowdown in China's economic growth, he said, as many are largely dependent on trade with the world's second largest economy. "And China is transforming from an export-oriented and investment-driven country to one (relying on) internal consumption, of course these will slow down growth in economies which are dependent on Chinese market, so you can say that if China sneezes, the emerging markets will catch a cold".

He emphasized that the crux of the problem lies in emerging markets themselves, arguing that the African continent should "diversify" so as not to be "overly dependent on just one source". He also said that intra-African trade, which only constitutes around 10 percent of the entire trade in the continent, should be promoted.

Mr. Odinga is in China to attend the Beijing Forum for Emerging Markets 2015, which is co-hosted by the Chinese People's Association for Friendship with Foreign Countries, the Emerging Markets Institute of Beijing Normal University, and the Emerging Markets Forum based in Washington D.C.

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