Resource-rich African countries have seen heavy investment from Chinese companies as they boost mineral production amid a global push for green energy. Such a country it is Zimbabwea major source of lithium, which has seen an influx of billions of dollars in investment and acquisitions from China in the Asian giant’s bid to dominate the lithium-ion battery market.
Likewise, the Democratic Republic of the Congo (DRC), which is the world’s largest producer of cobalt and a major source of copper, remains an important source of materials for China electric vehicle battery industry. China also imports minerals such as bauxite from Guinea and oil from Nigeria, Angola, Gabon and Ghana.
China’s largest trading partner in Africa is South Africa. In the first half of the year, the value of this trade reached US$27.5 billion, according to Chinese customs data.
During this period, imports from South Africa rose 10.7 percent to US$17.29 billion year-on-year, but Chinese exports to the African nation fell 18.6 percent to US$10.2 billion US dollars.
South Africa’s exports to China are mainly minerals and metals, but more recently China has started buying products such as soybeans, wine, rooibos tea, aloe vera gel and citrus fruits.
Later this year, avocados will subscribe to this list after the two countries signed an agreement at the Brics summit in Johannesburg last year.
“China is ready to speed up the process so that avocados from South Africa can be enjoyed by the Chinese people as soon as possible,” Chinese ambassador to South Africa Wu Peng wrote to X on Wednesday.
The deal comes amid Beijing’s plan to diversify trade in food and agricultural products and reduce his dependencies in countries such as the USA and Australia. As a result, China imports more food products from Africa – avocados from Kenya and Tanzania, fruit from South Africa and Zimbabwe, coffee from Ethiopia and chillies from Rwanda. It has signed trade deals with dozens of African countries, waiving tariffs on 98 percent of taxable items originating from those nations.
China’s trade with Africa appeared to reverse the general trend, with China recording an overall increase in exports. In June, exports rose at their fastest pace in more than a year, rising 8.6 percent in the month, while imports shrank 2.3 percent to hit a four-month low in June amid a sick of domestic demand caused by the real estate crisis and economic slowdown.
Regarding African exports to China, Mark Bohlund, senior credit research analyst at REDD Intelligence, said higher copper prices are a factor in the increased volumes.
“Higher production volumes also play a role,” he said.
“The depreciation of the Nigerian naira and, to a lesser extent, the South African rand and the Kenyan shilling likely contributed to the decline in Chinese exports as these are the largest markets in sub-Saharan Africa.”
However, he said, African exports to China will likely weaken somewhat in the second half of the year, mainly due to lower copper exports.
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Chinese-made electric vehicles face additional EU import duties of up to 38%
Chinese-made electric vehicles face additional EU import duties of up to 38%
While copper prices have slumped as a result of the coronavirus pandemic and the slowdown in the Chinese economy, the price recently rallied to reach an all-time high in May of around $10,900 per ton, breaking the previous record of $10,845 per ton in March 2022. The price has fallen slightly from May’s record high but remains strong at more than $9,500 per tone.
“I expect Chinese export growth to Africa to remain relatively weak, as growth in Nigeria and South Africa is likely to remain weak in the near term,” Bohlund added.
Charlie Robertson, head of macro strategy at asset manager FIM Partners, said Chinese exports to Africa may have fallen due to large currency devaluations in Egypt, Nigeria and Ghana, foreign exchange restrictions in Ethiopia and austerity measures in Kenya and other countries.
For Africa to service its debt to China, he said it needs a trade surplus, not a trade deficit.
“How else can Africa get the dollars it needs to pay off China?” said Robertson. “A shrinking trade deficit is going in the right direction, but we really want to see the opposite of total exports and imports The trade of China and Africa.”
Unfortunately, he said, China prioritized its own profit from Africa at every level of engagement – its exports to Africa, its lending to Africa, and by requiring those loans to use Chinese companies to build infrastructure and supply goods.
“As China’s big priority right now is exporting its way domestic property recessionI would expect it to try to boost exports to Africa next year,” said Robertson.