On June 26th, the website of the Citizen in Tanzania published an article titled “Why China is overtaking the United States in competing for African trade”. The author is Peter Kagwanja, director of the African Policy Research Institute in Kenya. The full text is excerpted as follows:
The pain of a “new cold war” between the United States and China is hard to ignore. The French Enlightenment thinker Montesquieu believed that trade brought peace. In stark contrast to his assertions, tensions between the world’s two largest economies have manifested themselves in a “trade war” caused by protectionism and the imposition of trade barriers such as tariffs.
Africa is one of the centers of the bitter US-China trade war. Over the past two decades, China has emerged as the undisputed market leader in Africa; US is lagging behind and catching up.
China has become an important trading partner of Africa that cannot be ignored. China has been Africa’s largest bilateral trading partner since it overtook the United States in 2009. China has the world’s largest market for Africa’s needs. Last year, China’s trade with African countries reached a record $282 billion.
Similarly, China finds Africa hard to ignore as the new frontier of global trade. Africa is extremely rich in strategic natural resources. The continent has about 30% of the world’s mineral reserves, 12% of its oil reserves and 8% of its natural gas reserves. With 60% of the world’s potential arable land, Africa is the new frontier for global food security. Africa’s population is expected to reach 2.5 billion by 2050, potentially making it the world’s largest and youngest market.
In Africa, China is applying Montesquieu’s opinion that trade can bring peace as well as development. The message is clear: Trade creates jobs, boosts prosperity and lifts people out of poverty. Since reform and opening up, Beijing has embarked on bold market reforms and trade liberalization that have lifted more than 800 million people out of poverty.
There are many reasons why China has become the undisputed market leader in Africa.
First, from the start, China has focused on the opportunities rather than the challenges in Africa’s emerging but volatile markets.
Second, as the west sees Africa as the “continent without hope,” China has seized on the limitless opportunities posed by countries recovering from conflict to expand its commercial footprint.
Third, China sees Africa as an emerging market: less competitive and less difficult to invest in than other competitive global markets. Chinese investors take a long-term view of trade and profitability, and if they expect a moment of uncertainty, they will pause rather than pull out of Africa.
Fourthly, China believes that African consumers in the 21st century have rich experience, strong brand awareness, and extensive knowledge, so it has adjusted its market strategy accordingly. It targets low-income consumers and realizes that the bottom of the pyramid is the future of the African market.
Fifth, China avoids a one-size-fits-all view of Africa, taking into account each country’s unique challenges and opportunities.
Based on the Forum on China-Africa Cooperation’s new development cooperation architecture, and linked globally to China’s trillion-dollar infrastructure project, the Belt and Road Initiative, China-Africa trade is soaring.
As Nobel Prize-winning economist Joseph Stiglitz rightly pointed out, “In developing countries, inadequate infrastructure is a far more serious barrier than tariffs.” Through this development cooperation architecture, China has financed the infrastructure that connects the continent to global trade networks and supply chains.
Over the past two decades, China has invested more than $155 billion to build and upgrade more than 10,000 kilometers of railways, nearly 100,000 kilometers of roads, more than 1,000 Bridges and 100 ports, and 66,000 kilometers of transmission and distribution systems in Africa. This infrastructure has opened the door to trade and investment in Africa.
However, the persistent trade imbalance in China’s favor has forced Beijing to take a series of steps to rebalance its trade relationship with Africa.
First, it has signed bilateral trade agreements with African countries to eliminate tariffs and other trade and non-trade barriers.
Second, China is diversifying and increasing imports of agricultural products from Africa. China announced at the 8th Ministerial Conference of the Forum on China-Africa Cooperation in 2021 that it hopes to import $300 billion from Africa in the next three years.
Finally, China supports Africa’s industrialization and adds added value to African exports. More African countries are connected to China’s “Silk Road e-commerce”.
Trade promotion is one of the “nine projects” proposed in the China-Africa Cooperation Vision 2035. In this context, China pledged $10 billion to promote African exports and continued to support the construction of the African Continental Free Trade Area.
Clearly, China is outpacing the US in the new scramble for Africa. But for the continent, which accounts for only 1% of world trade, to be fully integrated into global trade and supply chains will have to be clever.