China-Africa Trade

As China’s economy shifted from its strict state control to a more market-oriented system, and as its manufacturing sector expanded, its trade with African countries inevitably rose. China’s factories needed minerals and its refineries and power stations needed hydrocarbons, both of which were available in abundant quantities in Africa. China’s imports of oil and copper in particular soared as its new industrial revolution took off.

However, the trade balance is not entirely one-sided. Chinese products are now ubiquitous across Africa.

The same reforms to the Chinese economy that opened it up to international trade, also led to the creation of large, privately-owned enterprises that harboured international ambitions. These companies first competed at home, developing and supplying products and services for their domestic market. In doing so, they evolved into world-class businesses able to operate on the international stage. The same advantages that China had as a low-cost manufacturing centre, coupled with their experiences of operating in an emerging market context, allowed them to enter other parts of the developing world at an affordable price point and with management teams that understood the sometimes inefficient or incomplete structures they would face.

Africa became a major beneficiary of the internationalisation of Chinese companies. The developed world was less receptive of Chinese goods in some categories, although “Made in China” is still an almost universal sight in garment shops. The country has expanded its output to include high technology products, with some, such as HTC, being widely used worldwide.

With underdeveloped but rapidly growing consumer markets in Africa in need of low-cost, entry-level products in everything from electronics to motorbikes, the continent was a good fit for China’s output.

CHINA’S DEEP IMPACT ON AFRICA

Beijing’s political engagement no doubt helped. Although China has long had an interest in Africa, contributing in a limited way to its economic development with aid and cooperation programmes, the more mercantilistic approach that has taken off in the past decade has had a deep and fundamental impact in Africa. Multi-layered partnerships with African countries, meshing financial support, trade deals and mining and infrastructure agreements have seen many Chinese politicians and businesspeople come to the continent. The depth of the engagement has normalised trade and investment, bringing Africa to the front of mind for Chinese exporters, and China as a natural destination for African entrepreneurs.

In 2010, China surpassed the US as Africa’s largest single country trading partner. Trade expanded from $8.1bn in 2000 to $126.9bn in 2010, as both imports and exports surged.