Running head: ECONOMICS
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The Trade between China and African countries
Wentao Zhou
Word count: 3032
ECONOMICS
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The Trade between China and African Countries
The Communist Party of China founded The People’s Republic of China on October 1st,
1949. The Second World War had just ended in 1945, and three years’ war of liberation depleted
capital in China. Many western people commented that the Communist Party of China was good
at military affairs but terrible for the economy. In the early days of the People’s Republic of
China, it did not have any friends, and in the same period, only a few countries recognized the
People’s Republic of China (Persson, & Sharp 2015). Therefore, looking for partners was
important for China. In the meantime, many Africa countries declared their independence from
colonists, and they were looking for new allies. As a result, these African countries started to
establish diplomatic relations with China. Today, China has established diplomatic relations with
48 out of 53 African countries. Establishing diplomatic ties can make it easier for economies to
trade with each other, turn indirect trade into direct trade, and maximize profits for both.
China has invested more in Africa in recent years. According to statistics from the United
Nations, in 2000, the trade volume between China and Africa was only about $10 billion, but in
2017, it reached $200 billion. Between 2000 and 2017, China invested predominantly in the
construction industry, light industry, and agriculture in Africa (Ministry of Commerce People’s
Republic of China, 2019). The African-China trade makes both African countries and China
have a high GDP growth rate, and it also promotes a good relationship between China and
African countries (Mlambo, Kushamba, & Simawu, 2016).
International trade plays an essential role in the development of countries and the world
economy. It balances the supply and demand between countries and makes efficient use of the
factors of production. Comparative advantage is the fundamental basis for countries to
participate in international trade because it improves the level of production technology,
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optimizes the domestic industrial structure, and strengthens economic ties among nations, and
promotes economic development. International trade will benefit all participating countries
(Ol’ga, & Matiukhina, 2019). It is the best way to promote economic growth and develop good
rapport among them. Eli Heckscher and Bertil Ohlin, two Swedish economists, argue that the
basis of comparative advantage is the relative abundance of factors of production rather than
differences in labor productivity. Products produced by countries using their relative abundance
of elements will have a comparative advantage. Therefore, international trade will benefit
countries that are participating in it.
After the Second World War, many Asian, African, and Latin American countries
struggled for national independence and national liberation. In 1955, the Bandung conference
was grandly convened (Lee, 2010). It was the first major international conference in which Asian
and African countries and regions discussed the vital interests of the people of Asia and Africa
without the participation of colonial powers. The Bandung conference mainly discussed issues of
common concern to all countries, such as safeguarding peace, striving for national independence,
and developing the national economy. The primary purpose was to promote economic and
cultural exchanges between Asian and African countries and jointly resist colonial and neocolonial activities of the United States and the Soviet Union. In the Bandung conference, China
advocated the five principles of mutual respect for territorial sovereignty, mutual non-aggression,
non-interference in each other’s internal affairs, equality and mutual benefit, and peaceful
coexistence as the principles for handling state-to-state relations (Persson, & Sharp 2015). That
had significantly promoted the development of solidarity and cooperation between China and
African countries. Many African nations started to trade with China after the Bandung
conference.
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Egypt was the first African country and Arab country, which established diplomatic
relations with China in 1956 (Economic and commercial Counsellor’s office of The Embassy of
the People’s Republic of China in the Arab republic of Egypt, 2004). The establishment of
diplomatic ties with Egypt has also promoted China’s relations with other African and Arab
countries. China and Egypt have maintained long-term friendly relationships from 1956 to now.
Until 2011, Egypt was China’s fifth-largest trading partner in Africa and the fourth largest in
2012. In 2013, two-way trade reached 10.213 billion US dollars. Over the years, the main
products exported by China to Egypt include clothing, textile yarn, fabric and products,
footwear, luggage, and bags; General industrial machinery and equipment, spare parts, power
machinery and equipment; Telecommunications and audio products. The main products
imported from Egypt are marble, steel, aluminum ingots, petroleum and related products, nonmetallic mineral products; Long-staple cotton, linen, yarn, fabric, etc. Marble accounts for about
50% of my total imports from Egypt ((Lihua, 2004). China has expanded its cooperation with
Egypt through exhibitions, promotions, and promotions to raise the level and level of bilateral
economic and trade cooperation. The two sides have made remarkable achievements in mutually
beneficial cooperation in the fields of automobiles, telecommunications, and medicine. Besides,
in terms of trade in services, China’s Cosco shipping company and China ocean shipping
company pay Egypt more than US$100 million annually for cargo handling through the Suez
Canal.
China invests heavily in Africa’s construction industry; at the same time, China
repeatedly carries out assistance construction industry projects in Africa. With the improvement
of China’s domestic infrastructure, many Chinese construction companies are looking for
overseas markets. Many African countries cannot build some large buildings by themselves
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because they are underdeveloped and do not have efficient technology. On this basis, the Chinese
government has allocated special funds for African countries every year for several decades
(Taylor, 1998), successively assisting in the construction of various projects and projects with a
total value of over one trillion Yuan. The key projects include hospitals, schools, housing,
government offices, ports, television stations, power stations, roads, railways, and other
infrastructure projects covering all areas of people’s livelihood. For example, in the 1970s, when
China was still in economic difficulties, China helped build the 1,600 kilometer-long TanzaniaZambia railway (Bosshard, 2007). With a total construction area of 58,000 square meters, the
international conference center in Cairo, Egypt, assisted by China, holds hundreds of
international conferences and exhibitions every year, promoting the development of local trade
and tourism. By the end of 2009, China had helped build more than 500 infrastructure projects in
Africa, including the Belevin-Blau Road in Somalia, the Friendship Port in Mauritania, the
Magerd-Beng Canal in Tunisia, and the National Stadium in Tanzania (Bosshard, 2007). The
African Union Conference Center and other projects are under construction. At the same time,
China also provides technology output, helps African countries to train technical professionals.
China wins a good reputation and trust from recipient countries; therefore, its construction
companies become welcomed in African countries.
Consequently, more Chinese construction companies start to invest in African countries.
They can not only open up their markets in Africa, maximize their profits, but they can also help
African countries to build better infrastructure. Some infrastructures, such as the TanzaniaZambia railway, are also one of the critical issues to help economies grow. The World Bank
shows that Zambia had negative GDP growth before 1979, and it was unstable, but after 1980,
the annual GDP growth rate in Zambia become more smoothly and higher (Jenkins, & Edwards,
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2005). Tanzania-Zambia railway provides both Tanzania and Zambia with convenient
transportation, and it also makes them easier to trade.
Africa’s climate is mostly tropical, and the more rainfall there is, the less suitable it is to
grow traditional food crops. Besides, there are many deserts in Africa, which is also bad news for
agricultural production. Due to poor natural factors, China provided technical support for African
countries in recent years. China’s activities in Africa are still dominated by bilateral aid, but
China has become increasingly involved in multilateral and regional cooperation. For example,
over the past three decades, African governments and outside donors have reduced investment in
agriculture (Selmi, Bouoiyour, & Miftah, 2019). In Africa, the share of government budgets
allocated to agriculture declined from 7.3 percent in the 1980s to 3.8 percent in 2000 (Cohn,
2013), while investment by the donor decreased from 18 percent to 3.5 percent over the same
period (Cohn, 2013). Africa urgently needs to stem the decline in agriculture. It was around the
same time that China started to get involved in African agriculture. In the 1960s and 1970s,
China built more than 80 demonstration farms with a total area of 45,000 hectares (Cohn, 2013).
After that, the focus turned to technology transfer and training. By 2009, China had launched 200
agricultural projects, set up 23 fishing grounds, dispatched more than 1,100 agrarian experts, set
up 11 agricultural research stations, and set up 60 agricultural investment projects in various
regions of Africa. Large and medium-sized state-owned enterprises undertake the vast majority
of investment projects. But small private companies and individuals can also look for
opportunities in Africa. Between 2003 and 2008, more than 4,000 Africans came to China to
study agriculture-related subjects for three weeks to three months. Investing in Africa can yield
enormous returns. African leaders should work with China to invest in improving people’s skills
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and working capacity (Dreher, Fuchs, Hodler, Parks, Raschky, & Tierney, 2019). These will help
realize Africa’s agricultural potential and significantly improve food security.
Commercial trade is the most significant part of the China-Africa trade rather than
construction aid and agriculture aid. From the 1980s to the 1990s, China’s exports to Africa were
mainly light industry, food, chemicals, native produce, and livestock. Since 2000, the export of
machinery and equipment, automobiles, electronic products, and other mechanical and electrical
products has increased significantly, and the quality and technical content of commodities has
improved substantially. At present, mechanical and electrical products account for more than
50% of China’s exports to Africa (Selmi et al., 2019). In terms of African exports to China,
primary commodities such as cotton and phosphate used to be significant commodities. In recent
years, steel, copper, fertilizer, electronics, and other manufactured goods from Africa have
entered the Chinese market. At the same time, the export growth of African agricultural products
to China has accelerated. Citrus from Egypt, wine from South Africa, cocoa beans from Ghana,
coffee from Uganda, olive oil from Tunisia, sesame seeds from Ethiopia, and other specialty
products have gradually become familiar and popular with Chinese consumers. China’s imports
from Africa fell in 2009 as a result of the international financial crisis, but agricultural imports
rose by 25 percent. Since 2005, China has granted zero-tariff treatment to some African least
developed countries that have diplomatic relations with China. By July 2010, the beneficiary
commodities had been extended to more than 4,700 tariff items, which will gradually cover 95%
of all tariff items in the customs import and export tariff of the People’s Republic of China.
Driven by the zero-tariff policy, African exports to China have increased. From 2005 to the end
of June 2010, China imported us $1.32 billion worth of African goods under zero-tariff
treatment, including agricultural products, leather, stone, textile and clothing, machinery parts,
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base metals, and wood products (Selmi et al., 2019). China has also helped African enterprises to
expand their presence in the Chinese market by holding African commodity exhibitions, setting
up African product exhibition centers, and offering exclusive and convenient measures such as
booth fee exemption and exemption.
Trade is the primary form of economic cooperation between China and Africa. With the
development of China and Africa relations and increasing exchanges, the scale of trade between
China and Africa has expanded. From the 1980s to the 1990s, China’s exports to Africa were
mainly light industry, food, chemicals, soil, and livestock products. Since 2000, the export of
mechanical equipment, automobiles, electronic products, and other mechanical and electrical
products has increased significantly, and the quality and technological content of goods has
improved substantially. Currently, mechanical and electrical products account for more than 50%
of China’s exports to Africa (ECOWAS-SWAC/OECD, 2006). In China’s dealings with Africa,
the Chinese government provides a lot of effective policies. Many Chinese people started to
migrate to Africa, and they teamed up a business group that developed the light industry in
Africa. They produced most electronic appliances, textiles, and clothing in Africa. For example,
in 2007, the Chinese government announced that they would have preferential credits, which
value US$5 billion, consisting of US$3 billion concessional loans and US$2 billion export
buyers’ credits.
Moreover, China would also have direct investment, including a US$5 billion ChinaAfrica Development Fund, to support Chinese FDI in Africa. China not only provides capital in
the trade but also further opens up China’s market to Africa by expanding the list of duty- free
African exports and setting up trade cooperation zones in Africa (Taylor, 1998). Since lack of
technology, China also trains for African professionals and sends agriculture experts to Africa;
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set up agriculture technology demonstration centers in Africa; double Chinese government
scholarships for African students.
South Africa is the most industrialized country in Africa. 2018 is the 20th anniversary of
the establishment of diplomatic ties between China and South Africa (Songtian, 2018). So, South
Africa started to establish a diplomatic relationship with China in 1998. The World Bank shows
that South Africa’s GDP kept around current US$150 billion after South Africa starting trade
with China and became much higher after 2002. In 2017, South Africa’s GDP was about current
US$349.268 billion. In the same year, China-South Africa bilateral trade reached US $39.17
billion (Songtian, 2018), which is more than 10% of its GDP in 2017. At present, China has
exceeded 200 enterprises in South Africa, ranking the first in Africa. China helps them build
railways and dual-flow” locomotive tailored in South Africa. For South African consumers,
Chinese brands have become an important choice when choosing home appliances. South
African Vice President, Cyril Ramaphosa, said that South Africa attaches great importance to the
development of South Africa-China relations from a strategic perspective (Dreher et al., 2019).
They are willing to learn from China’s experience in industrialization and the construction of
special economic zones, focus on promoting bilateral cooperation on production capacity,
Marine economy, and energy, and enhance South Africa’s ability in related industries. On the
other hand, South Africa has the most significant number of Chinese immigrants, the largest
number of Chinese tourists, and the Chinese students in Africa. South Africa’s students also go
to China to study. Therefore, such as this international trade deepens the bond of nations. It helps
both countries have a good relation, make more and deeper cooperation in the future.
Although China and many African countries are making a bigger cake, there are many
problems in the trade. First, there are dozens of African countries. The social conditions vary
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from state to state, and their market opportunities and development prospects also differ. Chinese
companies lack sufficient understanding of African countries’ political and economic
environments and policies to attract foreign investment. The industry only relies on perceptual
knowledge or the investment environment of the state in which it wants to invest, and the market
sales prospects are not fulfilled. Divide investigation research, undertake investment rashly. Due
to the great blindness of this kind of venture, the enterprise cannot adapt to the market demand
after putting into production, which ultimately leads to the failure of the investment. Second,
Chinese enterprises lack coordination in entering the African market. To occupy the local
market, some enterprises compete viciously through “price war.”
A small number of enterprises invest for impure purposes and ship equipment to African
countries to produce and sell products. They only care about making money and do not attach
importance to product quality and corporate reputation, thus damaging the image of Chinese
enterprises. Also, Chinese companies have acted in violation of local labor laws in some African
countries. Third, the business environment in African countries still needs to be further
improved. In some nations, the time and cost of setting up a company are relatively high. In
some states, the tax burden is extremely high, and in case of compliance, the enterprise will fail
to function. At the same time, due to historical reasons, the infrastructure of many African
countries is relatively underdeveloped and unable to meet the needs of the healthy development
of enterprises. Examples of such include traffic congestion, which causes great difficulties in the
transportation of raw materials and products needed by business entities for production, power
shortage, intermittent product production, affecting the regular operation of enterprises, and so
on. In expanding employment in some African countries, it is difficult to control the flow of
Chinese personnel to work in these countries. As a result, Chinese enterprises sometimes have to
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hire local professionals. As a result, their operating costs have risen substantially. Therefore,
Chinese investors have to do more researches and surveys when they are planning to invest in
Africa. On the contrary, China is also a big country; African investors also need to learn more
about local culture in China.
In conclusion, due to the context of long-term colonization and the cold war between the
Soviet Union and the United States, many Asian and African countries begin to trade with each
other. Just like China trade with African countries, both sides benefit. China helps African
countries build better infrastructure, trains professional technicians in both construction and
agriculture areas, provides light industry products, and provides better education for African
countries. African countries also offer a lot of natural resources and capital for China. In 2017,
the trade volume reached $200 billion US dollars, which is 20 times the trade volume in 2000.
More capitals are invested in the China-African trade recently, and both China and African
countries have a high GDP growth rate in recent years. Today, China mainly invests
construction, agricultural, and trade products with Africa. I hope they will explore more and help
Africa lift itself out of poverty. With the expending China-Africa trade, more business people are
participating in it. All of them have to learn more about local laws and culture before they are
planning to invest so that they can avoid unnecessary fails. The African-China trade builds a
good relationship between both sides. I hope China will establish friendly diplomatic relations
with all the African countries in the future and achieve the goal of economic win-win. For the
sake of economic growth, I believe it is more effective to help the weak than to conquer them. In
our current rich living conditions, we must not forget that many children in Africa are dying of
hunger. We should help them out of poverty as soon as possible and live a life like ours.
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