Change of formula

The nature of trade between Africa and China has begun to shift

As Africa presses on with industrialization and urbanization it is increasingly buying from China the machinery and consumer goods it needs to make these two things happen.

Even though serious price fluctuations in commodity markets shook both sides' economies and market demand last year, trade between China and Africa was worth $201 billion in the 11 months to November, up 5.3 percent year-on-year.

Cao Jiachang, deputy director-general of the department of Western Asian and African Affairs at the Ministry of Commerce, says this is largely because many African countries have turned to other goods to trade with China, such as agricultural products, clothing and chemicals, because they are keen to help the continent further reduce its heavy reliance on natural resources.

"China's exports to Africa are shifting toward products with higher technical content, such as mechanical and electrical products, motorcycles, televisions, better building materials for housing and other infrastructure items, mobile phones and telecommunications equipment," Cao says.

Africans' purchasing power has greatly improved in recent years, thanks to the rapid pace of urbanization, a peaceful development environment and more government funds for industrial projects and efforts to raise standards of living.

At the same time, Chinese products have had the advantage of being cheap but of good quality. Many Chinese companies such as the car maker Lifan Group of Chongqing and the shoemaker Huajian Group of Guangdong have moved to establish their brands and standards in Africa.

"We have also been seeing renewed interest from Chinese companies in investing in things such as steel, cement, electronics, clothing and car assembly lines," Cao says.

Diao Chunhe, president of the China International Contractors Association in Beijing, says: "China's project contracting businesses in Africa have also increased exports of mechanical and electrical products to the continent."

Growth in trade between China and Africa will continue to be robust, he says. In addition to increasing in size, quality is also improving as mechanical and electrical products displace garments and plastic products in accounting for some of the biggest volumes of Chinese exports to Africa, a remarkable trend over the past three years.

The Chinese government is yet to issue complete China-Africa trade figures for the whole of 2014, but Zheng Yuesheng, spokesman for the General Administration of Customs, says China's trade with emerging markets including Africa, Russia and India amounted to $475 billion for the year. Trade between China and Africa grew 4.3 percent, he says.

The Institute of West Asian and African Studies at the Chinese Academy of Social Sciences has tipped that trade between China and Africa may have surpassed $230 billion last year.

As the price of oil fell globally in the second half of the year, many African economies reliant on exporting oil suffered revenue and currency losses.

Angola and Nigeria, sub-Saharan Africa's two biggest oil producers, have fared particularly badly as the oil price has fallen below $60 a barrel.

Although the difficulties presented by falling oil prices are not unique to African producers, it is clear that African economies will be more severely hit by them than are other developing regions.

Zhao Zhongxiu, a trade professor at the University of International Business and Economics in Beijing, says commodity trade between China and Africa will continue to reflect their comparative advantages this year. The primary resources that dominate African exports are sent all over the world, and not just China, he says.

"China's economic development needs the primary products of energy and resources that account for more than 65 percent of the continent's exports. Africa therefore will continue to export a similar amount of energy and resources to China this year."

Within the framework of the Forum on China-Africa Cooperation, China will raise its investment in agriculture, education, infrastructure and transport in Africa, along with diversified trade models.

Some African countries, such as Angola, Cameroon, Ethiopia and Ghana, eager to increase their exports and avoid the long-term negative effects of the global financial crisis, have also shifted their focus to China from their traditional trading partners such as the US and European countries, Zhao says.

"Many African countries are keen to step up their work in building new industrial foundations or economic zones, and China's exports of electro-mechanical and labor-intensive products to the continent grew steadily last year."

Exports of seven categories of labor-intensive products including footwear, furniture, plastics and textiles grew rapidly in Africa, as did exports of construction machinery and manufacturing equipment.

Even as growth in the volume of Chinese exports to the world has eased, more and more Chinese manufacturers retain high ambitions for trade with Africa.

Xie Weiming, vice-president of the Zhejiang International Business Group Co in Hangzhou, says the company's exports had a rough time in developed markets last year.

"Five or eight years ago exports grew at 15 percent to 20 percent a year, but that was certainly not the case last year."

In 2013 the company had revenue of $5.4 billion, with exports accounting for $4.36 billion of that, and Xie says exports may have grown by about 5 percent last year.

"We started to tap African and Southeast Asian markets from 2010 onwards, after the global financial crisis developed in Western countries. The growth rate for exports doubled that year, but subsequently we found that we could not maintain the same pace."

Xie says that though developed markets, especially the US, have already returned to normal growth rates, they have not benefited Chinese companies.

Many labor-intensive manufacturing industries in Zhejiang have moved to Africa and Southeast Asia because of lower labor and material costs, Xie says.

Guangdong Marshell Electric Vehicle Co Ltd, a designer and manufacturer of electric vehicles in Zhaoqing, Guangdong province, is another company that is looking to Africa for growth. The company plans to export more small electric vehicles and bicycles to Africa this year, says Shu Wen, general manager of Marshell's sales department.

"Attracted by lower prices, demand for Chinese-made electric vehicles is growing rapidly in South Africa, Tunisia and Algeria," Shu says.

Wang Zhile, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, a think tank of the Ministry of Commerce, says China will take many measures to promote the growth of China-Africa trade, including implementing the Special Plan on Trade with Africa.

These measures will help expand the scope of zero tariff treatment for African products exported to China and increase China's imports from Africa, and improve brand building, marketing channels and quality of China's commodities exported to Africa.

To help with these moves, Wang says, China will help African countries improve their customs and commodity inspection facilities by mobilizing aid for trade, provide support for African countries to promote trade facilitation, and push forward trade development within Africa.

Contact the writers through zhongnan@chinadaily.com.cn

(China Daily Africa Weekly 01/23/2015 page6)