China Trade Grew to $55.5 Billion By 2006
East African (Nairobi)| 3 July 2007
By Francis Ayieko
allafrica.com
Africa reaped the fruits of a "new silk road" as its trade with China grew to $10 billion in 2000, up from $12 million in the 1980s.
By last year, trade between the Asian country and Africa had hit a record high of $55.5 billion.
Trade experts say East Africa's share in the total trade between China and sub-Saharan Africa is still relatively small, but is growing at a faster rate.
Although East African countries have mainly been exporting agricultural products, analysts say this is likely to change in the near future as China plans to invest in the oil, gas and mineral sectors of Uganda, Tanzania, Ethiopia and Kenya.
A recent World Bank study says increased exports to China and higher commodity prices have led to increased income for African countries, especially those exporting raw materials.
"The terms of trade of these countries have improved and their foreign exchange earnings have increased.
"East African countries also import goods and productive inputs at fairly cheaper costs," says Joseph Karugia, a director of African Economic Research Consortium.
However, China continues to be blamed for contributing little to Africa's long-term need to diversify its exports, with its imports from the continent being dominated by raw materials.
Demand for commodities is volatile and even relatively extended booms remain essentially "windfalls" in nature, said Mr Karugia in a paper he presented at a recent conference in Naivasha to discuss East Africa's role and interests in a changing global order.
"It is, therefore, difficult to translate the commodity trade into a long-term, sustainable development effort," he said.
It has also been argued that China "dumps" cheap products in Africa. This is not to mention the contention in some countries that Chinese products are killing local industries.
Analysts say the scenario has undermined local industries and potential benefits such as value addition, industrialisation and job creation.
"These effects are compounded by the fact that the vast scale of China's exports has depressed prices in several global markets to which African countries are seeking to export their products," said Mr Karugia.
But China is also well known in Africa for its investments initiatives. In East Africa, Uganda and Kenya stand out when it comes to recent foreign direct investment inflows. Since 1993, the Uganda Investment Authority has licensed about 75 projects from China worth about $92.1 million.
In addition, further investments by the Chinese government in Uganda's energy sector and railway network are said to be on the way and a $120 million loan for developing information and communication technology infrastructure has already been provided.
On the other hand, Kenya, which only recently began strengthening ties with China, is now seen as a gateway to the region. It has become the key focus of China's trade and economic strategy in Africa.
In 2004 and 2005, more than 50 Chinese investors had established businesses in Kenya, with investments rising to $4 million.
"In general, Chinese investments appear to be highly competitive and often deliver good quality outputs," says Mr Karugia.
China is also endearing itself to Africa through its no-strings-attached aid. Since aid from the West - usually tied to conditions of good governance - began to dwindle in the 1990s, China has been increasing its aid flows to Africa.
According to available statistics, China has invested in 800 aid projects in Africa over the past 50 years. Chinese aid to 43 African countries increased from $347.6 million in 1990 to $1.8 billion by 2002.
China's aid effort was broadened recently to cover debt relief, technical assistance, tariff exemptions, training programmes and contributions to peacekeeping efforts.
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