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China-Africa Trade Hit US$282 Billion In Retrospect, Africa Trade Deficit Widens, Commodity Prices As Key Factor

China-Africa Trade Hit US$282 Billion In Retrospect, Africa Trade Deficit Widens, Commodity Prices As Key Factor 

Africa’s trade deficit expanded to US$64 billion as China recorded a drop in trade with top partners on continent which are predominantly resource rich. Analyst predicts it will take time and long-term effort to find a trade balance, and China might need to offer something new.

China’s total trade with Africa grew a modest 1.5 per cent in 2023 from 2022 to US$282.1 billion, but Africa’s trade deficit with China widened, according to the latest Chinese customs data.
Chinese exports to Africa reached US$173 billion, an increase of 7.5 per cent over 2022, while its imports from the continent dropped by 6.7 per cent to US$109 billion, figures from the General Administration of Customs showed. While the US$100 million year-on-year increase made 2023 bilateral trade a record, Africa’s trade deficit with China continued to expand, from US$46.9 billion in 2022 to US$64 billion last year.

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In Beijing, trade officials tried to strike an upbeat tone, hailing China’s role as Africa’s largest trading partner “for 15 consecutive years”. “The 1.5 per cent growth was … a reflection of strong resilience of the China-Africa trade,” Jiang Wei, head of the commerce ministry’s West Asian and African affairs department, told reporters on Wednesday.

Observers said the modest growth followed the pattern of China’s overall trade with other regions as it faced severe economic headwinds, including weak business and consumer confidence, tepid global demand, a property crisis and heavy local government debt that could constrain the ability to stimulate the economy. Last year, the value of China’s total global trade slumped 5 per cent from the previous year to US$5.93 trillion.

According to Chinese customs data, in 2023 China recorded a drop in trade with its top five trading partners in Africa – South Africa, Angola, Nigeria, the Democratic Republic of Congo (DRC) and Egypt – which are predominantly resource-rich nations.

In the DRC, where China sources more than 60 per cent of its cobalt to make electric vehicle batteries, two-way trade dropped 13.2 per cent last year to US$18.75 billion compared to the same period in 2022. China’s imports from the DRC dropped by 13.9 per cent last year to US$14.27 billion over 2022. Analysts said the drop in imports from Africa could partly be attributed to the drop in the price of key minerals, metals and oil that China mostly imports from some African countries. For instance, a tonne of cobalt averaged US$63,739 in 2022 but the price had dropped to below US$30,000 by the end of 2023.

Lauren Johnston, a China-Africa expert and an associate professor at the University of Sydney’s China Studies Centre, noted that the 2023 trade figures related to price volatility for resources such as oil and copper. China imports raw materials from the continent, including oil, copper and aluminium, whose prices dropped in the past year. “A fall in these and Africa’s trade earnings will fall, even if volumes stay the same – and sometimes even if they grow,” Johnston said. “To a large extent today, Africa’s trade balance depends on the price of oil.”

The price of Brent crude oil averaged US$83 a barrel in 2023, down from US$101 per barrel in 2022, a drop mostly driven by an oil supply shortage after fears over the Russia-Ukraine war gripped the markets, sending prices falling. However, a drop in oil prices is good news for Africa’s own oil importers, which tend to be the economies with a better chance of industrialisation. “It’s not necessarily bad news,” Johnston said.

Carlos Lopes, a professor in the Nelson Mandela School of Public Governance at the University of Cape Town in South Africa, said the modest changes also reflected a continuing lower demand from China despite the ascending curve starting in 2022. But Lopes said economic growth, consumer demand and overall economic performance in both China and Africa were still recovering from the pandemic and the impact of the war in Ukraine. “It is also clear that the Chinese government has been adjusting its trade policies, tariffs and regulations considering the tensions with the US and climate-related developments,” Lopes said.

“It is also important to bear in mind that changes in exchange rates have affected the competitiveness of goods from Africa, influencing trade volumes and values.” China has come under fire for its vast trade surplus with most parts of the world, with some accusing it of promoting an unhealthy balance by selling finished products to Africa while buying mostly raw materials.

To address the trade imbalance, Beijing has pledged to grow its imports from Africa by opening “green lanes” to African agricultural exports and allowing more African products into the Chinese market duty-free.
Over the past two years, about two dozen African nations have benefited from Beijing’s decision to waive tariffs on exports from the “least developed countries” in Africa.

On the sidelines of the Brics summit in Johannesburg in August, Chinese President Xi Jinping told African leaders that China would step up efforts to reverse the trade imbalance, including helping African countries produce more food products and set up industries to process them locally.
Beijing has said it aims to import products worth US$300 billion from Africa by 2024.

But Johnston said addressing a trade imbalance would not happen overnight. While increasing agricultural exports could improve trade balance with individual countries and raise the income of some rural communities, it is unlikely to make a big dent in Africa-wide trade balances in the near future, if ever, unless there were large-scale exports, such as the soybean exports from the US and Brazil or dairy from New Zealand. She said it would take long-term effort for both Africa and China to find a trade balance, and China might also need to offer something new. “Building competitive and sustainable exports beyond energy and minerals is not easy. It takes time,” Johnston said.

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