T he “marriage of convenience” between China and Africa is coming under increased pressure as trade relations remain skewed in favour of the Eastern giant. “The continent as a whole maintains a trade deficit with China, while export dependency levels have increased, especially for oil and metals,” said Ruben Nizard, economist for sub-Saharan Africa in the Coface economic research department. “This may be problematic as it could lead to “Dutch disease”, a mechanism by which increases in revenues from natural resources make an economy’s currency stronger, resulting in the nation’s other exports becoming more expensive and imports becoming cheaper. The consequences include a less competitive manufacturing sector and increased exposure to commodity price volatility.” But, said Nizard, in spite of this trend, African leaders had become more savvy about engaging China in the region. “The latest developments present the possibility that the China-Africa relationship may be able to go from being a failed marriage of convenience to a win-win partnership based on mutual respect,” he told FTW. “Agricultural commodities and wood products have emerged as a small but welcome addition to Africa’s export basket to China, while Chinese outward direct investment and lending has started to diversify away from the extractive sectors, focusing more on manufacturing, utilities and services.” This diversification, he said, had already translated into higher exports – albeit still very low – of low valueadded manufactured goods into China. “Trade continues to be a main defining feature of China-Africa relations, with some marked geographical differences. For instance, Western and Eastern Africa possess trade deficits with China, while Southern and Central Africa have surpluses,” said Nizard. “Southern Africa (led by South Africa) accounts for most of the continent’s exports to China, followed by Central Africa (led by Angola). On the other hand, Western Africa (led by Nigeria) and Eastern Africa (led by Kenya and Tanzania) account for most of the imports. Exports of commodities such as oil, metal ores and gold continue to account for the lion’s share of total exports, at around 80%. Again, the concentration is highest for China’s traditional partners in Africa, namely Angola, Zambia and South Africa. While we don’t expect this will go away overnight, it is expected that exports of these type of goods to China will slow vis-à-vis previous years.” He said in contrast, imports were more diversified on a product and country basis. Manufactured articles were the largest single import (28%), followed by machinery and transport equipment (23%). A lot of this demand was in more dynamic economies located in Eastern (Kenya, Tanzania) and Western Africa (Nigeria) as well as South Africa. “Exports from China to these regions are set to increase in line with rising living standards. That said, higher living standards usually go hand in hand with better education. This can be an opportunity to diversify export baskets provided these economies are capable of attracting investments into their manufacturing sector and develop adequate levels of infrastructure.” Beyond trade, said Nizard, China continued to play a prominent role as a source of funding for African countries. “Most Chinese investments have typically gone to regions that, being big exporters of commodities, also have very high levels of export dependency on China. These include South Africa, Angola, Nigeria, Congo, and Zambia. However, things have started to change.” Places such as Ghana, Kenya and Ethiopia are experiencing rising inflows, said Nizard. “Most of these inflows are not extractive in nature, but focus on services and manufacturing. This makes sense given that China wants to offshore some of its low-value-added manufacturing to regions with lower costs. Chinese private companies are also settling in African countries in order to reach out to local consumers, particularly in Eastern and Western Africa.”
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