Connecting Africa to China
China seeks to diversify imports from Africa China seeks to diversify imports from Africa
China commits to fixing existing trade imbalances with Africa by increasing non-resource imports African nations could benefit by increased trade with other countries China... China seeks to diversify imports from Africa
  • China commits to fixing existing trade imbalances with Africa by increasing non-resource imports
  • African nations could benefit by increased trade with other countries

China and Africa’s relationship has traditionally seen China extracting resources from mineral rich African countries. While this has allowed African nations to develop their industries, it has led to a large dependency on China as a main export market.

Analysis of 2017 export figures shows that for some countries, such as South Sudan, China makes up 95% of its exports. Certain countries have used this to their advantage, exchanging resource riches for China’s funding of infrastructure projects. But this exchange can be detrimental, such as in the case of Angola exchanging oil for key infrastructure finance, which turned south during the commodity crash.

Africans have been pushing for an export strategy that is less reliant on raw materials. This would contribute to the development of African industries, providing countries with a more diversified macroeconomic offering.

China has embraced this new strategy. As one of eight key initiatives at the recent Forum on China- Africa Cooperation at the end of 2018, China committed to fixing the existing trade imbalance by increasing non-resource imports.

China has also exempted less wealthy nations from paying exhibition fees for goods at the upcoming Sino-Africa trade expo in June.

These measures may seem small, but China has indicated it will provide some financial assistance in this regard.

President Xi Jinping floated the idea of setting up mechanisms to support the growth of e-commerce in Africa, and provide support for China-Africa branded products. Financially, China has committed to a US$10 billion fund for development financing, indicating a potential shift to more development focused investments.

This marks an important milestone for African economies, as the shift from resource to non-resource exports would potentially open up European and US markets to trade.

The verdict is still out as to whether the African economies are financially stable and have strong enough fiscal and monetary control to herald this move. Resource based economies have traditionally been easy targets for corrupt government officials to take advantage of and loot the public coffers. A shift from relying on resources may benefit economies, but it needs buy-in from top officials to work.

Countries would also need to commit to more open trading agreements to increase the number of trading partners and diversify their economies. A commitment to the continental free trade agreement would be a step in the right direction as this would enable easier regional trade, which could facilitate the development of non-resource industries.

Read more here:

https://qz.com/africa/1605497/belt-and-road-africa-mineral-rich-nations-export-mostly-to-china/?utm_source=email&utm_medium=africa-weekly-brief

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