China's trade with Africa gets boost from rising commodity prices despite impact of Covid controls




  • In Business
  • 2022-08-06 09:30:00Z
  • By South China Morning Post

Trade between China and Africa grew by 16.6 per cent to US$137.4 billion in the first half of this year, boosted by a recovery in commodity prices, especially oil.

China imported goods worth US$60.6 billion from Africa, a 19.1 per cent increase compared with the same period in 2021, according to the latest figures from China's General Administration of Customs. Meanwhile, exports to the continent increased by 14.7 per cent to US$76.8 billion.

However, growth was fastest in the earlier part of the year, with analysts attributing the drop-off to pandemic-related supply chain disruptions including the Shanghai lockdown and port closures.

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A shutdown at the port of Durban in South Africa, through which nearly a fifth of Africa-China trade passes, as a result of floods may also have affected the flow of some commodities.

Charles Robertson, the global chief economist at investment bank Renaissance Capital, said a recovery in commodity prices will have fuelled the rise in China's imports from Africa. But he warned: "China's slow imports growth in June suggests the second half may see slower growth."

Last year total trade between Africa and China rose by 35.3 per cent year on year to US$254.3 billion, while African exports surpassed pre-Covid figures by rising 43.7 per cent to US$105.9 billion.

In the first six months of the year there was a notable drop in imports from key countries such as South Africa, which saw an 11.7 per cent drop to US$14.3 billion even as Chinese exports grew by 17.8 per cent to US$11.1 billion.

Imports from Nigeria and Egypt also dropped by 17.7 per cent and 22.5 per cent respectively.

But the same period saw a sharp rise in imports from other countries, including Ghana, Djibouti, the Democratic Republic of Congo, Ivory Coast, Equatorial Guinea, Zambia, Angola and the Republic of Congo.

Most of these countries are resource-rich and supply vital commodities to China. Angola sells most of its oil to China while the DRC is where China sources most of its cobalt, an essential component of batteries for electric vehicles, smartphones, tablets and laptops. Meanwhile, Zambia is the continent's second-largest copper producer and has attracted many Chinese companies.

 

Flooding that forced the closure of the port of Durban, a major export hub to China, is likely to have disrupted the flow of commodities. Photo: Shutterstock alt=Flooding that forced the closure of the port of Durban, a major export hub to China, is likely to have disrupted the flow of commodities. Photo: Shutterstock>

In May, Tommy Wu, Hong Kong-based lead China economist at Oxford Economics, said demand for African agricultural products was unlikely to be affected by the recent lockdown of Chinese cities, since Beijing was prioritising food security.

He added: "The demand for commodities used in electric vehicles and batteries, as well as for building green-energy facilities, are also unlikely to be affected as China prioritises the development of these sectors."

Virag Forizs, an emerging markets economist at Capital Economics, said total trade between China and Africa continued to grow at a healthy pace, despite the recent slowdown.

"Elevated commodity prices, particularly oil and metals, likely propped up Chinese commodity imports from key African producers," she said.

 

African oil producers have benefited from a rise in prices following the Russian invasion of Ukraine. Photo: AFP alt=African oil producers have benefited from a rise in prices following the Russian invasion of Ukraine. Photo: AFP>

But Forizs said the room for further commodity price gains was probably limited, adding: "We think that China's economic recovery will become more challenging, further weighing on demand for imported goods. And China's exports are likely to turn from a tailwind to a headwind."

Most Chinese exports to Africa are finished products - ranging from textiles to electronics - while African exports are dominated by raw materials and unprocessed products, resulting in a trade surplus in China's favour.

To help balance out the trade, Chinese President Xi Jinping promised in November to increase imports from Africa to US$300 billion in the next three years.

He told the Forum on China-Africa Cooperation that Beijing would open "green lanes" for African agricultural exports, and offer US$10 billion in trade finance to support such sales.

 

China has promised to increase the number of imports from Africa to address the trade gap between the two. Photo: Xinhua alt=China has promised to increase the number of imports from Africa to address the trade gap between the two. Photo: Xinhua>

Last month, Ethiopian Airlines launched a new cargo route between Addis Ababa and Changsha, the capital of Hunan province, which the authorities hope will become a key China-Africa trade and logistics hub.

Wu Peng, director general of the Chinese foreign ministry's African affairs department, said the route was expected to carry 17,000 tonnes of cargo annually between Changsha and Addis Ababa.

African countries have also benefited from deals that will allow them to export more agricultural products, including coffee, avocados, chilli peppers, cashew nuts, sesame seeds and spices.

Chen Mingjian, China's ambassador to Tanzania, said this week that last year, China imported nearly 100 million tonnes of soybeans, including 263,300 tonnes from Africa - a fivefold year-on-year-increase.

Tanzania only started exporting soybeans to China in 2021 and so contributed only a small proportion of the overall total, but Chen said: "China's market is very big, we welcome more Tanzanian soybeans."

Similar deals have been reached for ­avocados, tea, coffee and roses from Kenya, coffee and soybeans from Ethiopia, beef products from Namibia and Botswana, fruit from South Africa, and coffee from Rwanda.

In January, Chinese Foreign Minister Wang Yi signed a deal with Kenya allowing fresh avocado and aquatic products into the Chinese market, which previously would only accept frozen fruit - locking out many traders in the East African country who could not afford freezing facilities.

The first batch of avocados from Kenya arrived in Shanghai in late July after clearing the final hurdles from customs and the national plant protection organisation.

"I'm told Chinese importers show strong interest in these high-quality avocados and plan to import on a bigger scale. I look forward to more good news on the import of African agriproducts," Wu tweeted.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2022. South China Morning Post Publishers Ltd. All rights reserved.

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