China has undoubtedly become Africa’s trade sweetheart. The love affair between the two often has caused a lot of controversies due to China’s unrivalled dominance in the unceremonious affair between them. Regardless of the opportunities in the relationship, it has always been considered an unmatched affair. Globally, the Africa-China or China Africa trade relationship is a prominent topic for various reasons.
Africa-China trade reached US $282 billion in 2022
China’s exports from Africa are largely raw materials, giving it a net surplus.
Africa imports finished goods from China, resulting in a net deficit yearly.
While Africa is viewed as a vulnerable partner seeking comfort in the loins of her giant lover, China is an undoubted economic celebrity that shoved its way to the top through brass and iron gates and thus has created for itself an image that the world sees as unattractive. It is safe to say China is the lover who is only there for Africa because it wants Africa’s warmth, which comes from abundant natural resources. But what makes this love affair a glorious doom’s creed for Africa, if that is even the case to start with?
Trade volumes have been increasing between China and Africa over the years and, in 2021, reached a record high of $251 billion. However, that was after the figure fluctuated to $176 billion in 2020 due to Covid-19. That singular drop still showed the strong ties between the two trade partners, And if you considered that 20 years earlier, China-Africa bilateral trade only amounted to about $10 billion. This shows that Africa has slowly but steadily walked over and dropped all its trading lines in Chinese pools and is ready to get its fair share of the Chines goodies. The goodies come in many forms, such as generous loans and infrastructure which have become Africa’s biggest lure and bargaining topics in recent years.
There is no denying that Africa’s growing population has given its leaders a dizzying headache for infrastructure, which it clearly cannot meet quickly. That prompted quick and short-term actions out of desperate ion. The activities offered short-term remedies, and their consequences for Africa and benefits are long-term, as exampled by some loan agreements between several countries in the continent with the Asian superpower for infrastructure projects.
Whoever comes to your aid when you are in need is your love, and China is Africa’s love for that simple. China is always ready to give Africa loans that other trade partners cannot or would not give. That made China the de facto influencer of Africa’s decisions and mindset. Chin se businesses in Africa are interested in raw materials and bringing finished goods from Asia, so Africa has conditioned itself to accommodate that need.
Trade boom, China’s win and Africa’s loss
Despite the rising trade volumes between the Asian giant and the desperate but rising African continent, there is room for fear and caution. Trade volumes between n them have surpassed a quarter of a trillion as 2022 trade data showed an 11% increase, with values reaching $282 billion. Africa’s export t China reached $117.51 billion in 2022.
This, if valuable, should have been a significant milestone in Africa’s economic emancipation from external control. However, that cannot be said as most of Africa’s exports are raw materials with crude oil, copper, cobalt, iron ore and natural tobacco. In Sub-saharan Africa, where Chinese trade influence has soared in recent years, replacing French and other Western countries’ trade quotas, as shown in the chart below, about 54% of trade is in raw mate als, according to 2020 trade data.
Worthy of note in this is China’s outspoken commitment to ensuring a trade balance between the two trade partners. In 2018, China’s President Xi Jinping pledged many things to support Africa’s trade growth. Xi pledged that Beijing would promote African brands, offer industrial incentives to Chinese companies to increase their investment in Africa, increase imports from Africa and offer 100,000 scholarships to African students. Additionally, poorer African countries were promised debt exemptions and efforts to make more African products imported to China duty-free were reaffirmed. Following through with that, Beijing announced that beginning December 1 2022, 98% of taxable goods from Benin, Burkina Faso, Guinea-Bissau, Lesotho, Malawi, Sao Tome and Principe, Tanzania, Uganda and Zambia would benefit from the country’s zero-tariff policy, a staggering 8,786 products covered. Also, Beijing’s commitment to Africa’s infrastructure development cannot be underrated though the figures have plummeted since peaking at $11 billion in 2017.
China is not as generous as it claims to be, but it is not as ignoble as perceived by the West. South Africa is the largest bilateral trade partner with China in Africa, and trade volumes between the two countries were over $56 billion in 2022. When you move a year back to 2021, when China exported $20.5 billion to South Africa while importing $20.6 billion back to Asia, the major products were from the extractive industry as gold led with $5.05 billion and diamond at $4.46 billion. This, among other raw material-driven imports of China from Africa, provides China with a trade surplus year in and year out while Africa remains in a trade deficit yearly.
South Africa, as shown in the image above, posted a trade surplus of over $100 million; the same cannot be said of Nigeria, where China earned a net surplus of over $17 billion after exporting $21.9 billion to the Western African country while only importing $3.05 billion nearly half of which was petroleum gas. Angola, another of China’s major trade partners in Africa, achieved $18.12 billion in 2021 and, by May of 2022, already had a surplus of $1.3 billion over China in trade. But considering that most of those are in natural gas and petroleum products such as crude speaks volumes of how Africa is still a minor in this over two-decades-long trade romance.
Why Africa-China is going nowhere soon
Despite the advantage of China in exporting finished goods to Africa and importing raw materials which are low valued in return, China will remain Africa’s long-term sweetheart for various reasons.
China’s economic growth: the United States undoubtedly remains the owner of the title of a global super economy, but that is now more like a team that describes a group that includes China than a term referring to one nation. China has become the most important threat to the USA’s global economic control and ranks second globally, with a gross domestic product (GDP) of $17.825.5 billion. That is about $5 billion less than the United States $23,325.1 billion in 2021. With that growth is the rising need for raw materials to feed its huge manufacturing industry, which has kept China looking outside its borders for relief and that places its paths direct to Africa.
Africa’s natural resources: just like the first reason for China’s continued bonding with Africa, the continent also has more even to attract the Chinese. Nearly all of Africa’s 54 countries and territories have something of value to China. From crude to minerals all the way to agriculture, the continent has all that China needs.
So with a need to satisfy and another with the resources that it largely cannot turn into something significant, China would do everything to remain around for a very long time until Africa begins to add value to its natural resources by turning them into finished products. If that is done and the cost of the products rises, China may consider other options outside the continent and only then will the affair be threatened. If you follow the trend, though has been instances of trade volume decline between the two regions, it has always risen and performed even better, as shown in the chart below.
Africa’s growing population: Africa is the youngest continent globally and has a population of over a billion. This creates a very large market that is hungry and waiting to be satisfied. China has a large manufacturing industry that can produce goods very cheaply. That makes the two regions attractive as Africa provides the market and China the goods to satisfy the market. This can be concluded to be a win-win scenario for both parties. Still, economically and based on attaining sufficiency, Africa is losing out by serving as the market for finished products from China. In the short term, Africa cannot meet its growing population’s needs for clothing, electronic appliances, and other consumable goods. Hence, China remains the convenient lover as other options are comparably expensive.
Belt and road initiative: arguably China’s largest attempt to stamp its influence globally, the Belt and Road Initiative (BRI) has been oversubscribed by Africa, particularly due to the promise of development. Africa’s greatest need now, besides good leadership, is infrastructure, so it is desperate to enter into any relationship that offers that. To tell how Africa is desperate to have these projects under BRI, 44 African countries have joined BRI. So if anyone thought China and Africa would be gone soon, that needs rethinking because the signs all point to a long future together.
China’s “Go Out” policy: China implemented the “Going Out” policy in 2000 to encourage Chinese companies to invest outside the country. That move saw China surge in global influence as it became the second largest country with foreign direct investment (FDI) outflow behind the United States. In 2012, China’s FDI outflow reached a staggering $84.2 billion, up from $2.7 billion ten years before. Ten years later, in 2022, China accounted for a $150 billion FDI outflow globally.
It was only bettered by Japan in second place with $162 billion and the United States in first with $403 billion, according to a report by OECD. That policy has also been the driving force behind the increasing amount of loans and credit facilities offered by China to Africa. Nearly all the countries have some sort of a loan from China.
The above reasons, among others, have kept Africa and China together in the first place. And would keep them together long into the future.
Regardless of whether the relationship between Africa and China is far from a win-win affair, it is undeniable that Africa has been a bigger beneficiary of China’s outstretched arm of generosity. There cannot, not be a price to pay for every free gift received. So China definitely is expected to get its returns for being generous to Africa, but the ball is in Africa’s court to decide what is good for its people and do what is necessary to get that.
China cannot be Africa’s economic foe but a great ally if only Africa decided right and acted right to take the opportunities presented by China’s desperate need for resources. This can be done by African leaders shifting the negotiation from China exporting raw materials from the continent to the country supporting Africa to add value to the products that China needs in Africa.
Metals are needed for China’s construction and manufacturing industry, so instead of exporting raw ore, they could be turned into ready-made material for onward export to feed the Chinese industry. Crude and other major resources exported from Africa to China can be refined before lifting them out.
Until then, Africa and China’s love affair would continue to be seen as an uneven patch of romance based on lack and need.
Source: Ghana Web
)
