In 2010, as a fresh graduate from high-school, I made the decision to study Mandarin while at Yale University. I was pushed to this decision because I had realized a challenge and thus an opportunity. From 2006 onwards I realized that many of the electronic devices my family would purchase from Accra’s markets came with Chinese manuals no one could understand. It was at this same time, I realized the ubiquity of the label "Made in China". My father, who had previously served as the agent for the Japanese automobile brand Subaru and thus frequently visited Japan, shifted his sights to China. And he was not the only one – a drive by the Chinese embassy would reveal long queues of Ghanaians all seeking visas to go to China to purchase products that we so badly needed back at home. And Ghana was no exception. On my first trip to Zimbabwe in 2011, I was surprised to see signs in the airport in Mandarin and rows of shops in Harare run by Chinese traders.China was taking our markets by storm and there was no denying its impact.
Indeed, China is Africa’s largest trading partner. And it’s done so in a stupefying short period. Within a decade, China’s trade with Africa has increased at an average growth of 21 percent from $13 billion in 2001 to $188 billion in 2015 – far surpassing any other country. And despite China’s economic slowdown in recent years, trade volumes have remained high with bilateral trade in 2016 amounting to $149.1 billion and $170 billion in 2017. For several African countries, China is an important market for their exports – for 16 countries China alone accounts for 20 percent or more of exports. This importance of China as a market for African goods is further buttressed by the fact that in 2017 growth in bilateral trade between China and Africa has been driven by an increase in imports from Africa (up 32.8 percent form 2016), and a marginal (2.7 percent) increase in exports from China to Africa.
However, China-Africa trade is marked by a notable imbalance in favor of China. A whopping 74 percent of African countries have a trade deficit with China. African exports to China largely comprise low-value added agricultural goods and natural resources such as oil, ores and copper. Consequently, the value of Africa’s exports to China are heavily dependent on commodity prices that are highly variable as well as demand from China’s industries, which is slowing down. On the other hand, Chinese imports to Africa are largely higher value- added products such as electrical appliances, which command more stable prices and tap into Africa’s growing consumer market. This has resulted in the value of Chinese exports to Africa owning the lion’s share of China-Africa trade. The effect of this has been a significant trade imbalance between China and Africa reflected in the graph below:
So, while it is undeniable that China’s opening up has led to significant economic trade between China and the rest of the world, notably Africa, it is also inarguable that trade has not been equitable. Despite this imbalance, Africa has benefited. We have been able to access goods and products at much cheaper prices than would have otherwise been possible. Indeed, Africa’s growing rate of mobile penetration is in part due to the successful product localization and distribution of Chinese companies such as Huawei and Transsion which have provided cheap, smartphones to Africa’s increasingly millennial and consumer society. But it is also clear that such large trade imbalances – if uncorrected - will have damaging long-term effects on Africa’s development and industrialization prospects. First, the import of cheap Chinese manufactured goods negatively impacts local industries -- most notably Africa’s textiles industries. Second, as African countries such as Ethiopia, Ghana, Rwanda and Nigeria seek to industrialize there is a need to access global supply chains and markets. As Africa’s largest trading partner and the world’s largest market, access to the Chinese market is pivotal for Africa’s industrialization.
China, as a responsible WTO member and a close economic partner of Africa, has taken proactive steps to rectify the imbalance of trade between Africa and China. Notably, as stated in China’s Second Africa China Policy Paper, China aims to promote the facilitation of China-Africa trade by encouraging the import of more African commodities. Consequently, beginning in 2005 China implemented a Special and Preferential Tariff Scheme granting zero-tariff treatment to 97 percent of taxable items from Least Development Countries in Africa that have established diplomatic relations. However, despite this favourable tariff scheme, trade between China and Africa continues to remain unbalanced with a majority of LDCs continuing to export primary produce to China. This is due to a variety of factors:
Information asymmetry: there is little awareness on the ground in Africa of all the various export incentives, tariff schemes and opportunity to export to the Chinese market. In addition, there is some opacity around the product lines that benefit from the zero-tariff schemes.
Low industrialization levels in several African LDCs means countries are unable to take advantage of these PTAs. A review of exports from African LDCs highlight that primary commodities still dominate exports to China. This is a result of low manufacturing bases and thus low ability to produce products for exports.
African LDCs still face significant competition from other LDCs, notably in Asia which has price advantages. African countries that produce manufactured goods for exports are still often unable to export products at prices competitive to products exported by Asian LDCs due to greater transportation costs and inefficiencies in production.
African countries with the strongest potential to export higher-value added products are classified as MDCs and thus excluded. Countries with relatively strong and/or growing manufacturing bases such as Kenya, Nigeria, South Africa and Ghana are classified as MDCs and thus are unable to benefit from these PTAs and thus have to compete (at a disadvantage) with other countries such as Vietnam which are able to take advantage of other regional agreements such as the Asia-Pacific Trade Agreement. This is particularly disadvantageous for African countries as several European, Latin American and ASEAN MDCs or developed economies such as: Switzerland, New Zealand, Peru, Costa Rica, Pakistan and Chile have PTAs or FTAs with China.
However, despite these challenges, there is room for optimism. China’s first international import and export exhibition in Shanghai in November 2018 may help to bridge the information asymmetry gap. In addition, the US' increasing unilateralism and its growing trade war with China provide an opportunity for China to diversify its source of imports and also to show itself as a supporter of free trade and multilateralism. But work needs to be done to ensure this optimism gives rise to actual change. At Development Reimagined – an African-led consultancy and think-tank in Beijing, we believe that to drive toward more balanced Africa-China trade, specific steps need to be taken by different actors in the equation.
China should:
1.Extend its pledge of zero-tariff treatment of 97 percent of taxable items from African LDCs to100 percent and extend it to all African countries (including middle income countries) with diplomatic relations with China to support African trade and development
2.Provide technical assistance to African customs clearance institutions, standards boards, export agencies and exporters aimed at providing understanding of China’s custom laws and processes, and standards to enable African traders more efficiently export to China
3.Earmark financial assistance to the African Union Commission for at least 25 market feasibility studies of various African products in China to increase the export of value-added African agricultural and industrial products
4.Support the AU incubate anew African chamber of commerce in Beijing that will include desks serving the various regions in Africa
The African Union should:
5.Work with China to establish African trade export targets that can help serve as a benchmark to track progress
6.Follow-up the November Import-Export Expo in Shanghai by hosting conventions with Chinese importer and food manufacturer associations for information sessions on how to import from Africa, and highlight key products and agricultural produce per regional hub
7.Commission public handbooks to support various actors: Mandarin handbooks on best practices on importing from Africa, and English/French handbooks to support African exporters on navigating China’s customs processes and key channels for distribution
8.Secure funding and drive a rebranding Africa campaign in China to help improve the perception of Africa and – made in Africa – products. Inspiration can be drawn from the successful marketing campaign of Chile, which now exports cherries to China as a luxury food product and earns significant foreign exchange earnings.
African countries should:
9.Participate in trade fairs and China’s import fairs. African countries should actively attend national and regional import fairs with key national products and identify the ones that have strong demand and interest from Chinese buyers. This demand should be recorded in a systematic way - through surveys and query forms. For products that demonstrate strong demand but are subject to tariffs, African countries should actively advocate for preferential treatment.
10.Embed an export strategy into industrialization plans. As Africa increasingly attracts Chinese FDI into its manufacturing sector, it should actively encourage investment into sectors with strong export potential, and actively work to establish demand agreements from key buyers within China.
China’s opening up in the 1980s revolutionized commerce. Chinese goods have proliferated in markets everywhere. Africans have such an intimate experience of the effects of China’s opening up and manufacturing boom, that it has led to China becoming the No 1 study-abroad destination for Anglophone Africans.
Similar to my desire back in 2010 to study Mandarin, many other Africans recognize that with China’s significant trade and investment in the continent, speaking Mandarin is essential. This is now reflected in the decision of some countries, such as Zimbabwe and South Africa, to introduce Mandarin in public schools. But now, the relationship has reached a pivotal point. In order for it continue to be beneficial to both sides, China should respond to the US’ increasing protectionism by a new-found zeal for free markets and trade. China should reduce tariffs and support African countries benefit from trade in much of the way that it did. And African countries must increasingly realize the value of China not simply as a producer of goods and products its needs, but as a market for value-added products and advocate for more openness and support to capture the market opportunities China provides. Such a transformation is possible but it requires a concerted effort and a belief that products made in Africa can and should be as easily available in China, as products made in China products are available in Africa.
The author is China director of Development Reimagined.This article is selected from a book, The Sleeping Giant Awakes, jointly published by China Daily’s communication-led think tank China Watch and Guangdong People's Publishing House.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
Zahra Baitie
In 2010, as a fresh graduate from high-school, I made the decision to study Mandarin while at Yale University. I was pushed to this decision because I had realized a challenge and thus an opportunity. From 2006 onwards I realized that many of the electronic devices my family would purchase from Accra’s markets came with Chinese manuals no one could understand. It was at this same time, I realized the ubiquity of the label "Made in China". My father, who had previously served as the agent for the Japanese automobile brand Subaru and thus frequently visited Japan, shifted his sights to China. And he was not the only one – a drive by the Chinese embassy would reveal long queues of Ghanaians all seeking visas to go to China to purchase products that we so badly needed back at home. And Ghana was no exception. On my first trip to Zimbabwe in 2011, I was surprised to see signs in the airport in Mandarin and rows of shops in Harare run by Chinese traders.China was taking our markets by storm and there was no denying its impact.
Indeed, China is Africa’s largest trading partner. And it’s done so in a stupefying short period. Within a decade, China’s trade with Africa has increased at an average growth of 21 percent from $13 billion in 2001 to $188 billion in 2015 – far surpassing any other country. And despite China’s economic slowdown in recent years, trade volumes have remained high with bilateral trade in 2016 amounting to $149.1 billion and $170 billion in 2017. For several African countries, China is an important market for their exports – for 16 countries China alone accounts for 20 percent or more of exports. This importance of China as a market for African goods is further buttressed by the fact that in 2017 growth in bilateral trade between China and Africa has been driven by an increase in imports from Africa (up 32.8 percent form 2016), and a marginal (2.7 percent) increase in exports from China to Africa.
However, China-Africa trade is marked by a notable imbalance in favor of China. A whopping 74 percent of African countries have a trade deficit with China. African exports to China largely comprise low-value added agricultural goods and natural resources such as oil, ores and copper. Consequently, the value of Africa’s exports to China are heavily dependent on commodity prices that are highly variable as well as demand from China’s industries, which is slowing down. On the other hand, Chinese imports to Africa are largely higher value- added products such as electrical appliances, which command more stable prices and tap into Africa’s growing consumer market. This has resulted in the value of Chinese exports to Africa owning the lion’s share of China-Africa trade. The effect of this has been a significant trade imbalance between China and Africa reflected in the graph below:
So, while it is undeniable that China’s opening up has led to significant economic trade between China and the rest of the world, notably Africa, it is also inarguable that trade has not been equitable. Despite this imbalance, Africa has benefited. We have been able to access goods and products at much cheaper prices than would have otherwise been possible. Indeed, Africa’s growing rate of mobile penetration is in part due to the successful product localization and distribution of Chinese companies such as Huawei and Transsion which have provided cheap, smartphones to Africa’s increasingly millennial and consumer society. But it is also clear that such large trade imbalances – if uncorrected - will have damaging long-term effects on Africa’s development and industrialization prospects. First, the import of cheap Chinese manufactured goods negatively impacts local industries -- most notably Africa’s textiles industries. Second, as African countries such as Ethiopia, Ghana, Rwanda and Nigeria seek to industrialize there is a need to access global supply chains and markets. As Africa’s largest trading partner and the world’s largest market, access to the Chinese market is pivotal for Africa’s industrialization.
China, as a responsible WTO member and a close economic partner of Africa, has taken proactive steps to rectify the imbalance of trade between Africa and China. Notably, as stated in China’s Second Africa China Policy Paper, China aims to promote the facilitation of China-Africa trade by encouraging the import of more African commodities. Consequently, beginning in 2005 China implemented a Special and Preferential Tariff Scheme granting zero-tariff treatment to 97 percent of taxable items from Least Development Countries in Africa that have established diplomatic relations. However, despite this favourable tariff scheme, trade between China and Africa continues to remain unbalanced with a majority of LDCs continuing to export primary produce to China. This is due to a variety of factors:
Information asymmetry: there is little awareness on the ground in Africa of all the various export incentives, tariff schemes and opportunity to export to the Chinese market. In addition, there is some opacity around the product lines that benefit from the zero-tariff schemes.
Low industrialization levels in several African LDCs means countries are unable to take advantage of these PTAs. A review of exports from African LDCs highlight that primary commodities still dominate exports to China. This is a result of low manufacturing bases and thus low ability to produce products for exports.
African LDCs still face significant competition from other LDCs, notably in Asia which has price advantages. African countries that produce manufactured goods for exports are still often unable to export products at prices competitive to products exported by Asian LDCs due to greater transportation costs and inefficiencies in production.
African countries with the strongest potential to export higher-value added products are classified as MDCs and thus excluded. Countries with relatively strong and/or growing manufacturing bases such as Kenya, Nigeria, South Africa and Ghana are classified as MDCs and thus are unable to benefit from these PTAs and thus have to compete (at a disadvantage) with other countries such as Vietnam which are able to take advantage of other regional agreements such as the Asia-Pacific Trade Agreement. This is particularly disadvantageous for African countries as several European, Latin American and ASEAN MDCs or developed economies such as: Switzerland, New Zealand, Peru, Costa Rica, Pakistan and Chile have PTAs or FTAs with China.
However, despite these challenges, there is room for optimism. China’s first international import and export exhibition in Shanghai in November 2018 may help to bridge the information asymmetry gap. In addition, the US' increasing unilateralism and its growing trade war with China provide an opportunity for China to diversify its source of imports and also to show itself as a supporter of free trade and multilateralism. But work needs to be done to ensure this optimism gives rise to actual change. At Development Reimagined – an African-led consultancy and think-tank in Beijing, we believe that to drive toward more balanced Africa-China trade, specific steps need to be taken by different actors in the equation.
China should:
1.Extend its pledge of zero-tariff treatment of 97 percent of taxable items from African LDCs to100 percent and extend it to all African countries (including middle income countries) with diplomatic relations with China to support African trade and development
2.Provide technical assistance to African customs clearance institutions, standards boards, export agencies and exporters aimed at providing understanding of China’s custom laws and processes, and standards to enable African traders more efficiently export to China
3.Earmark financial assistance to the African Union Commission for at least 25 market feasibility studies of various African products in China to increase the export of value-added African agricultural and industrial products
4.Support the AU incubate anew African chamber of commerce in Beijing that will include desks serving the various regions in Africa
The African Union should:
5.Work with China to establish African trade export targets that can help serve as a benchmark to track progress
6.Follow-up the November Import-Export Expo in Shanghai by hosting conventions with Chinese importer and food manufacturer associations for information sessions on how to import from Africa, and highlight key products and agricultural produce per regional hub
7.Commission public handbooks to support various actors: Mandarin handbooks on best practices on importing from Africa, and English/French handbooks to support African exporters on navigating China’s customs processes and key channels for distribution
8.Secure funding and drive a rebranding Africa campaign in China to help improve the perception of Africa and – made in Africa – products. Inspiration can be drawn from the successful marketing campaign of Chile, which now exports cherries to China as a luxury food product and earns significant foreign exchange earnings.
African countries should:
9.Participate in trade fairs and China’s import fairs. African countries should actively attend national and regional import fairs with key national products and identify the ones that have strong demand and interest from Chinese buyers. This demand should be recorded in a systematic way - through surveys and query forms. For products that demonstrate strong demand but are subject to tariffs, African countries should actively advocate for preferential treatment.
10.Embed an export strategy into industrialization plans. As Africa increasingly attracts Chinese FDI into its manufacturing sector, it should actively encourage investment into sectors with strong export potential, and actively work to establish demand agreements from key buyers within China.
China’s opening up in the 1980s revolutionized commerce. Chinese goods have proliferated in markets everywhere. Africans have such an intimate experience of the effects of China’s opening up and manufacturing boom, that it has led to China becoming the No 1 study-abroad destination for Anglophone Africans.
Similar to my desire back in 2010 to study Mandarin, many other Africans recognize that with China’s significant trade and investment in the continent, speaking Mandarin is essential. This is now reflected in the decision of some countries, such as Zimbabwe and South Africa, to introduce Mandarin in public schools. But now, the relationship has reached a pivotal point. In order for it continue to be beneficial to both sides, China should respond to the US’ increasing protectionism by a new-found zeal for free markets and trade. China should reduce tariffs and support African countries benefit from trade in much of the way that it did. And African countries must increasingly realize the value of China not simply as a producer of goods and products its needs, but as a market for value-added products and advocate for more openness and support to capture the market opportunities China provides. Such a transformation is possible but it requires a concerted effort and a belief that products made in Africa can and should be as easily available in China, as products made in China products are available in Africa.
The author is China director of Development Reimagined.This article is selected from a book, The Sleeping Giant Awakes, jointly published by China Daily’s communication-led think tank China Watch and Guangdong People's Publishing House.
The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
