CHINA’S STRUCTURAL DEMAND AND THE COMMODITY SUPER CYCLE; IMPLICATIONS FOR AFRICA.

Abstract: Since the Second World War, commodity prices have experienced three major price booms, in 1951-53, then again in 1973-75 and finally in 2003-08. In 2003-08, it was China’s resource intensive growth that substantially increased demand. The steady rise in prices for most of the 2000s has been termed as a Super Cycle, fuelled by China’s domestic infrastructure and manufacturing growth. As China looked for supply security to fuel its growth, its resource driven engagement with Africa steadily increased. By 2008 China was one of the largest trade partners and investors in the continent. In the second half of 2008, as the financial crisis spread across the Advanced Economies, global recession set in and the commodity boom came to an end. With the 2008 global financial crisis, global commodity demand has fallen and so have commodity prices. This has strong implications for China’s resource driven engagement with Africa in the medium to long term. This paper examines the Commodity Boom of 2003-08, looking at the supply and demand factors behind the price rise. The 2003-08 period is contrasted with the previous two commodity booms in 1951-53 and 1973-75 in order to learn if the latest boom was unique in any manner. We then look at the nature of China’s structural demand and its future needs. Finally we highlight the implications of the commodity price fall for African countries, in relation to Chinese demand in the near future