Despite global supply chain challenges, the value of trade between China and Africa rose to record levels in 2022. The increase partially reflected a shift in China’s policy away from government-backed investment and towards enhanced trade and cooperation. According to China’s Customs agency, the value of the country’s trade with Africa rose by 11% to $282bn that year, driven by an increase in exports to the continent.
Looking to the future, trade volume looks set to continue this expansive trend, with trade constituting a key element in a joint plan released at the November 2021 Forum on China-Africa Cooperation (FOCAC) meeting.
Focac & Trade
Launched in 2000, FOCAC has given rise to a closer relationship between China and the African continent in both diplomatic and economic terms. However, the Covid-19 pandemic prompted a change in direction. The 2021 FOCAC conference saw China announce a pivot away from the government’s role as a direct financer of projects in Africa. This was reflected in President Xi Jinping’s pledge that year of $40bn to the continent – a 33% drop on the $60bn pledged at the preceding conference in 2018, and the first time that the sum committed by China decreased.
There was notably no concrete budget assigned to concessional lending, which has traditionally been the principal vehicle through which China has invested in infrastructure projects. This would seem to signal that China envisages that trade and private investment will offset the drop in government-backed funding.
The FOCAC meeting also saw the launch of the China- Africa Cooperation Vision 2035, the first mediumto long-term cooperation plan jointly developed by the two parties. Echoing China’s own Vision 2035, the document lays out eight areas of cooperation, among them development, trade and industry. In terms of trade, a key element was China’s promise to work to close the trade gap by importing $300bn of goods from Africa through to 2024. This will be facilitated by the opening of green lanes for African agricultural exports, an easing of inspection and quarantine procedures, and a broadening of the number of products on which no tariff is charged. This reflects growing Chinese appetite for products from Africa, and in particular agricultural goods: between July 2020 and July 2021 the value of exports of rubber, cotton and coffee doubled.
Achieving $300bn of imports in three years is a relatively modest target, considering that in 2013 China imported $100bn of goods from the continent, although the figure has dropped in the years since. Furthermore, this is substantially less than the value of goods imported from the EU. Meanwhile, the third China-Africa Economic and Trade Expo (CAETE) is scheduled to take place in June 2023 in Changsha City in central China. The second CAETE in September 2021 saw some $22.9bn worth of agreements inked.
Infrastructure Gap
China’s reduction of public funding may be a source of concern to African governments, given the traditionally important role China has played in developing infrastructure projects.
According to the Center for Global Development, between 2007 and 2020 China’s two main overseas development banks were among the top-three lenders to the African continent. The Export-Import Bank of China invested the largest sum over this period, at $20.1bn. The next-biggest lender was the African Development Bank (AfDB), with $4.5bn, followed by the China Development Bank, at $2.9bn.
The combined $23bn invested by the two Chinese banks was $8bn higher than the total of the eight other top lenders to the continent, among them the World Bank and the AfDB. Combined lending to Africa stood at around $9bn per year as of mid-2022. This was, however, still below the level of infrastructure funding that the continent requires to complete future initiatives. According to the AfDB, Africa’s infrastructure investment needs are valued at $130bn-170bn a year, with a financing gap of between $67.6bn and $107.5bn to support and accelerate further economic expansion.
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