The 2018 Statistics on China-Africa Trade have been published by Ministry of Commerce of the Peoples Republic of China and they show a holistic positive picture that China’s trade volume with Africa is on a steady rise.
Actual figures reveal that the total import and export volume was US$204.19 billion, in examining the China-Africa trends this represents a year-on-year increase of 19.7%. Breaking this figure down, China’s exports to Africa were US$104.91 billion, up 10.8% and China’s imports from Africa were US$99.28 billion, up 30.8%; the surplus was US$5.63 billion, down 70.0% year on year. In 2018, the growth rate of China’s trade with Africa was the highest in the world and China is currently Africa’s largest trading partner and has been for the past decade.
Five features significantly influence China–Africa trade: China’s comparative advantage in labor-intensive and capital-intensive production; Africa’s abundant natural resource endowments; China’s rapid economic growth; China’s emphasis on infrastructure building at home and in Africa; and the emergence of economies of scale in China’s shipping and light manufacturing sectors. These features inevitably tip the scales in favor of Chinese exports into Africa more significantly than the other way around. Additionally over the past 40+ years, China has indisputably taken huge steps to place itself firmly at the center of world trade, starting from the efficient exploitation of China’s economic advantages such as an abundance of cheap labor, smallholder farmers and developing sectors up the value chain.
A deeper look into these trade volume statistics reveals patterns and trends of great interest. In December 2018, China’s total imports and exports with Africa were US$18.27 billion, up 15.5% year on year and 2.1% month on month. Among these, China’s exports to Africa were US$9.55 billion, up 3.9% year on year and 3.0% month on month; China’s imports from Africa were US$8.72 billion, up 33.7% year on year and 2.2% month on month; the trade surplus was US$840 million, down 68.7% year on year and up 13.5% month on month. China-Africa bilateral trade has been steadily increasing for the past 16 years. However, weak commodity prices since 2014 have greatly impacted the value of African exports to China, even while Chinese exports to Africa remained steady increasing we see this more clearly in the visual representation of China-Africa trade below.
The expansion in the scale of trade, and trade structure over the years between China and Africa has optimized, and has seen advantageous products successively entering each other's market. China's exports to Africa were historically mainly light industrial products, food, chemical products, native produce and animal by-products. Since 2000, the export of machinery, automobiles and electronic items has been crucial, with product quality and technology markedly improved from earlier years. Currently, the proportion of machinery and electronic products accounts for more than half of China's exports to Africa. Africa's major export products to China used to be cotton and phosphate, among other primary products. In recent years, steel, copper, chemical fertilizers and electronic items produced in Africa have successively entered China's market. In addition, Africa's export of agricultural products to China has been increasing rapidly. Local specialties such as oranges from Egypt, wine from South Africa, cocoa beans from Ghana, coffee from Uganda, olive oil from Tunisia and sesame from Ethiopia have become familiar to and popular among Chinese consumers. The volume of trade between the two regions has increased by a compound annual growth rate of 21 percent since 2001.
Efforts to reduce the trade deficits are evident but slow paced. China has bilateral trade agreements with 45 African countries in pursuit of a win-win relationship with the continent. Many of these agreements are perceived to be quite generous, with China taking on negative trade balances while offering favorable terms in taxation, customs cooperation, and the inspection of goods. Also, China imposes zero tariffs on 4,700 products originating from some of Africa’s least developed countries, and accepts higher tariffs for its exports bound for Africa.
Most Africans believe that the opportunities presented by China’s engagement in Africa are bigger than those by that of the U.S., U.K., and E.U. But in the absence of a coherent China-Africa engagement strategy, the potential of these opportunities remains unfulfilled. More technological diffusion is also needed in Africa to improve production, service, and trade capacity.
All things constant, as China consumer purchasing power rises and living standards improve; Chinese products will inevitably become more expensive. Africa must then be ready for industrial opportunities as manufacturers seek cost comparative advantage just as they did moving into China decades ago. As Development Reimaged described it in their article “What impact is the G20 having on African trade? Exclusive Analysis”, Africa has the similar economic advantages that China had pre-economic reform; cheap labor, millions of smallholder farmers and increasingly healthy populations. The governments of Africa having built a solid and mutually beneficial relation with China are tasked to move and leverage it to develop a market for African products in China and manufacturers/producers from China. The aim should not be to compete but to differentiate, the secret to Africa China deficit adjustment is in the exploitation of natural resources to the benefit of Africa in value added products and sharing of the production burden.
Monkgogi Mpho Leepile
UIBE Master’s International Trade and Economics