Much is happening with China lately and the country is having to re-align its strategies to match changing global geo-politics. Specifically, US President Donald Trump has over the past couple of years put the Chinese on the defensive especially in the areas of bilateral trade, intellectual property, and recently Covid-19 origins.
For a country that has rapidly ascended to a number two global economic power unchallenged, China has definitely been caught off guard by President Trump. If China is forced to change its global economic strategies, Africa and Kenya will definitely be impacted one way or another.
While tracking oil markets, I have witnessed China stealthily spread out its economic influence and presence across the world including Africa as it sought raw materials, oil and gas to feed an overheated industrial growth to meet local and export demands.
The first indication of a runaway China industrial surge was when its energy demands exploded, overstretching global oil and gas supply capacity. This caused oil prices to spike from under $30 in 2003 to over $100 in 2007. And the same demand/supply/price scenario was playing out with minerals and other natural resources. Soon the Chinese economic performance became a critical reference metric for global energy and commodities markets, and has remained so to this day.
China ventured everywhere in the developing world scouting for new sources for energy and raw material to feed their factories. And when the Chinese stepped into Africa they found countries with virtually empty coffers and in desperate need for critical infrastructure funding. Soon it became a familiar routine of natural resource for infrastructure financing “barter” arrangements.
The Chinese soon became experts in infrastructure contracting and project financing in Africa, all supported by Chines state credit agencies. And for every infrastructure project, there was associated materials and labour imports from China. Africa was soon becoming a strategic Chinese partner fulfilling the wider national economic goals of China.
The Chinese nationals soon became a permanent fixture in Africa doing all manner of investments and businesses. And all along China maintained a low-profile policy of never poking their noses in the political happenings in Africa, and this endeared them to African governments.
All this was happening as the US and European Union were pre-occupied with global wars on terror, human rights, climate change and globalisation. Russia was busy finding its economic foothold, while Japanese exports were slowing down under stiff Chinese competition. And over the last five years these developed countries are belatedly crafting strategies for African entry, efforts that are unlikely to significantly undo Chinese dominance.
The western countries business models for Africa entry are usually based on private investments and rates of return with particular attention and caveats on political risks. The Chinese investment models on the other hand, are based on Chinese long term national strategic economic interests, and often involve government to government arrangements. Rate of return is usually a secondary consideration.
Trump has correctly challenged trade imbalances with China, a principle that Kenya should employ to seek and nurture more exports to China, especially in areas of agricultural produce. However, Kenya has to firstly develop capacity for increased quantity and quality of export produce.
And where Kenya can manufacture local goods, fiscal interventions should be applied to jealously protect our industries from Chinese imports which are normally lowly priced because their costing is usually based on marginal incremental costs. In respect of local commerce and skills, our local traders and contractors should be shielded by laws from unfair Chinese competition.
Going forward, and as demonstrated by President Trump, it will be less of free trade WTO protocols, and more of favourable bilateral trade negotiations. Kenya will need to sharpen its focus and capacity to negotiate equitable import/export deals with China or any other country that has skewed trade balances with Kenya
China I am sure has noticed that times are changing and will need to be more accommodating to protect its African turf. And for those countries seeking to challenge the Chinese economic stranglehold on Africa, they will need to re-think their market entry strategies, and probably accept to take wider risks.