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26 January 2023 – Trade between China and Africa surged last year to a record US$282 billion – an 11 per cent year-on-year increase bolstered by soaring commodity prices, China’s reopening and Beijing’s recent push to boost imports from Africa.
According to Chinese customs authorities, exports to Africa totalled US$164.49 billion for the 12 months to December, an increase of 11.2 per cent year on year. Imports from the continent rose at a similar rate to reach US$117.51 billion in the same period.
It was the second consecutive year of growth after the Covid-19 pandemic had a devastating effect on trade in 2020.
Analysts attributed last year’s numbers in part to higher prices for commodities, as natural resources such as crude oil, copper, cobalt and iron ore account for a large share of Africa’s exports to China.
Brent crude oil prices were elevated for much of 2022. After starting the year at around US$79.65 per barrel, prices jumped to US$133.18 per barrel in early March – just weeks after Russia invaded Ukraine – and rose even higher in June before beginning a gradual decline.
Charles Robertson, global chief economist at investment bank Renaissance Capital, said rising oil prices in 2022 would have boosted the value of African exports. He added that China’s reopening was positive for trade but needed to be considered alongside continued problems in the real estate sector, which has ceased to be a long-term growth driver for imports.
Copper reached its highest price ever in March 2022, trading above US$10,400 per tonne, but retreated in the second half to about US$8,400 per tonne by the end of 2022.
Cobalt prices reached a high of US$82,000 per tonne in March 2022 and fell gradually to about US$49,000 per tonne by the end of the year.
Lauren Johnston, a China-Africa researcher at the South African Institute of International Affairs, said the jump in trade could also have been caused by exchange rate gains or the fact that China has swapped some Australian products – coking coal, for instance – for African goods following trade disputes with Canberra.
Trade between China and Africa surged last year to a record US$282 billion – an 11 per cent year-on-year increase bolstered by soaring commodity prices, China’s reopening and Beijing’s recent push to boost imports from Africa.
According to Chinese customs authorities, exports to Africa totalled US$164.49 billion for the 12 months to December, an increase of 11.2 per cent year on year. Imports from the continent rose at a similar rate to reach US$117.51 billion in the same period.
It was the second consecutive year of growth after the Covid-19 pandemic had a devastating effect on trade in 2020.
Analysts attributed last year’s numbers in part to higher prices for commodities, as natural resources such as crude oil, copper, cobalt and iron ore account for a large share of Africa’s exports to China.
Brent crude oil prices were elevated for much of 2022. After starting the year at around US$79.65 per barrel, prices jumped to US$133.18 per barrel in early March – just weeks after Russia invaded Ukraine – and rose even higher in June before beginning a gradual decline.
Charles Robertson, global chief economist at investment bank Renaissance Capital, said rising oil prices in 2022 would have boosted the value of African exports. He added that China’s reopening was positive for trade but needed to be considered alongside continued problems in the real estate sector, which has ceased to be a long-term growth driver for imports.
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Copper reached its highest price ever in March 2022, trading above US$10,400 per tonne, but retreated in the second half to about US$8,400 per tonne by the end of 2022.
Cobalt prices reached a high of US$82,000 per tonne in March 2022 and fell gradually to about US$49,000 per tonne by the end of the year.
Lauren Johnston, a China-Africa researcher at the South African Institute of International Affairs, said the jump in trade could also have been caused by exchange rate gains or the fact that China has swapped some Australian products – coking coal, for instance – for African goods following trade disputes with Canberra.
While Africa mainly exports raw materials, it tends to buy finished products from China such as machinery, electronics and textiles, resulting in a trade surplus in China’s favour. But in recent years, Beijing has introduced policies to increase imports from the continent.
Last year, China allowed dozens of African countries, including Tanzania, Ethiopia and Uganda, to start exporting some of their products duty-free to China in a bid to correct the trade imbalance.
During the 2021 Forum on China-Africa Cooperation (FOCAC) Summit, President Xi Jinping said Beijing would open “green lanes” for African agricultural exports to China and offer US$10 billion in trade finance to support African exports.
Wu Peng, director general of the Chinese foreign ministry’s department of African affairs, noted that 90 per cent of the sesame in China comes from African countries such as Ethiopia, Tanzania and Uganda.
“China and Africa have complementary advantages in resources. We’ll keep promoting ‘green lanes’ for African agricultural exports and benefit both people,” Wu tweeted in December.
A number of African countries have signed deals with China allowing the export of agricultural products such as chilli peppers, cashew nuts, sesame seeds and spices.
Tanzania began exporting soybeans to China in 2020. Beijing has also agreed to import avocados, tea, coffee and roses from Kenya, beef products from Namibia and Botswana, coffee from Rwanda, fruit from South Africa and Ethiopian coffee and soybeans.
“This will boost export numbers, but in the case of resource-exporting countries, this isn’t likely to comprise a large share of trade as the total value is likely to be small against commodities,” Johnston said of China’s push to increase African agricultural imports.
However, she said that agricultural imports could raise the incomes of those in rural areas, where people tend to be the poorest. “So these exports are very good for employment and poverty alleviation,” she said, adding that they also help to raise agricultural productivity – a big plus for countries with growing populations.
China has been Africa’s biggest bilateral trade partner since overtaking the US in 2009.
But trade is heavily focused on a few resource-rich countries such as South Africa, which is the continent’s biggest market for Chinese products and China’s biggest source of minerals such as diamonds, gold and iron ore.
Last year, China-South Africa trade grew 5 per cent year on year to reach US$56.74 billion, and the country accounted for a fifth of Africa’s total trade with China last year.
South African exports to China dropped 1.3 per cent in 2022, likely because of flood-related disruptions at the Port of Durban. The Democratic Republic of the Congo (DRC) and Zimbabwe also use the port to export natural resources to China.
Beijing’s top African trade partners also include Angola, which sent US$23.25 billion in goods – mostly oil shipments – to China in 2022, and the DRC, the world’s largest producer of cobalt, which is used for making electric car and smartphone batteries.
Linda Calabrese, a China-focused research fellow at the International Economic Development Group, noted that since 2016, both African exports to China and Chinese exports to Africa have grown steadily.
The trend was interrupted in 2020 because of the Covid-19 pandemic, but the growth of both imports and exports has resumed since 2021, she said.
She attributed the growth to the resumption of economic activity in China and Beijing’s efforts to increase imports from Africa.
She said that within China, provincial institutions had taken the lead in boosting trade with the continent, and development partners such as the International Trade Centre were also working to increase African exports to China.
“With China’s economy reopening to the world, we see increased demand for commodities, in particular natural resources, that African countries export in large quantities,” Calabrese said.
“From what I can see now, we can expect a reopening of China’s economy in 2023, and with that, a continued increase, or even an acceleration, in China-Africa trade.” Source: South China Morning Post (SCMP)