China-Africa Trade Enjoys Solid Foundation and Promising Prospect

China-Africa Trade Corridor was formed in the 1950s， but trade between the two sides wasn’t prosperous until the year 2000. Economic cooperation between China and Africa has a long history. Trade between China and Africa registered only US$12.1 million in 1950， and just over US$1 billion in the 1980s. The China-Africa Cooperation Forum was established in 2000， opening a new chapter in the history of China-Africa economic and trade relations. Since then， trade between the two sides has increased significantly， soaring to US$55.5 billion in 2006 when the Third ChinaAfrica Cooperation Forum was held. The figure increased to US$106.8 billion in 2008， but shrunk to US$91.1 billion in 2009 due to the global financial crisis and the price decline of bulk commodities. China-Africa trade volume hit a record high of US$126.9 billion in 2010， according to recent data released by China General Administration of Customs.China-Africa trade is balanced in terms of import and export volumes. China’s export and import with Africa is roughly even. Yearly trade balance between the two sides is approximately US$5 billion， which is negligible compared with the total volume of the bilateral trade. However， China-Africa trade is unbalanced in terms of geographical distribution and types of goods.African nations are very different from each other in trade with ChinaThe 53 African countries vary greatly with respect to foreign trade. There is a great deal of difference between their trade and economic relations with China.Fig 1 lists China’s top 10 trading partners in Africa from 2006 to 2010 (ranked by average trade volume). Angola was ranked as China’s largest trading partner， with an average annual trade of over US$18.6 billion， followed by South Africa with US$16.7 billion. Six of China’s top ten trading partners in Africa are oil-exporting countries， three of which have relatively diversified economies. China’s trade with the top ten partners accounted for 76% of its total trade with Africa， showing that ChinaAfrica trade is highly concentrated geographically.Fig 2 shows that China’s trading partners in Africa are increasingly diversified， sending two messages:? It is not surprising that most of the nations having trade surplus with China are exporters of natural resources， such as Angola， Sudan and the Republic of Congo. However， Nigeria and Algeria， two traditional oil exporters， have significant trade deficit with China. South Africa， China’s second largest trading partner in Africa and a major exporter of iron ore to China， has almost balanced trade with China. It should be noted that China’s trade with African nations are not all dominated by bulk commodities.? In the 53 African countries， 14 have trade surplus with China， while 39 have trade deficit. On one hand， Africa may be a strategic supplier of natural resources to China. On the other， more African countries with considerable market potential， are becoming destinations of China’s exports.China’s imports from Africa is still dominated by energyWith respect to the type of goods traded between China and Africa， China’s import of natural resources from Africa is the driving force of trade between the two sides. Since 2004， over 90% of China’s imports from Africa have been primary products. Among them， fuel is dominant (accounting for 64% of the total trade between China and Africa in 2009)， followed by iron ore and metal (24%) and other bulk commodities， and food and other agricultural products (5%).In the past decade， trade in oil， China’s major import from Africa， has surged. Besides oil prices， the major factors pushing the increase of trade in oil include:? China’s rising demand for natural resources. China’s rapid economic development means a huge demand for energy. According to IEA estimates， China’s oil demand has grown faster than the global demand for energy. China’s oil demand has increased from 6% in 2001 to 11% in 2011 of the world’s total demand. Africa’s rich oil reserves and increasing output have met China’s need. Now China imports 32 percent of its oil from Africa.? China buys “new oil” from Africa. Africa’s oil production increased significantly from 7.11 million barrels/ day in 2000 to 9.25 million barrels/day in 2010. Although oil production in the three traditional OPEC countries - Nigeria， Algeria and Libya hasn’t increased over the years， Angola (joined OPEC in 2007)， Sudan， the Democratic Republic of Congo， Equatorial Guinea and other oil-producing countries have contributed to the increase in oil production in Africa. In the past five years， China-Africa trade has shown a trend of diversification， but is still limited to primary products.? Iron ore and metal. The share of iron ore and metal in China’s imports from Africa increased from 12% in 2000 to 24% in 2009. Chinese companies are stepping up their expansion in the African market - the copper market in Zambia， copper and cobalt markets in the Democratic Republic of Congo， and aluminum market in Mozambique and Guinea. China is buying a soaring share of African exports of iron ore and metal， especially in the last five years.? Food and agricultural raw materials. Food is another one of Africa’s abundant natural resources. There is a huge demand for food not only in China but also in the rest of the world. To ensure food supply， China signed land lease contracts with Ethiopia and Mauritius.China’s imports from Africa concentrate in countries rich in natural resources. Fig 3 lists the top ten African countries in terms of resource exports to China. Obviously natural resources still dominates China’s imports from Africa. Imports from the top ten nations account for 90% of China’s total imports from Africa， showing that China’s imports from Africa is highly concentrated geographically.A notable feature of trade in bulk commodities between China and Africa is that China’s trade volume with emerging exporters of natural resources has increased rapidly， such as trade in oil with Angola， Sudan and the Republic of Congo， and trade in copper with the Democratic Republic of Congo and Zambia. From 2000 to 2009， Angola’s oil output increased from 750，000 barrels to 1.74 million barrels per day， the Democratic Republic of Congo’s copper production from 33，000 tons to 376，000 tons per year. During the same period， China’s share of Angola’s oil exports rose from 25% to 41%; its share in D.R.Congo’s copper exports rose from 1% to 49%. In comparison， China’s share of Nigeria’s oil exports was only 1.4% in 2009.China-Africa trade and investment are sometimes led by governments. State-owned enterprises especially stateo w n e d o i l companies， often work with China Export-Import Bank to grant African countries loans guaranteed by oil. In some cases， the loans include agreement on “loans for infrastructure” between China and Africa or “Angola model” loans. This kind of loan first started in Angola， and was later made in the Democratic Republic of Congo. Details of the loans are not known， bringing some uncertainties to their economic viability. Yet， these agreements have promoted the overall bilateral trade. China’s influence in emerging African countries is a manifestation of strong economic growth of the two sides.Most of China’s export destinations in Africa are large economiesCompared with China’s imports from Africa， its exports to the continent are more widely distributed. Fig 4 lists China’s top ten export destinations in Africa. Except Benin and Liberia， the rest of the eight nations are Africa’s largest eight economies(ranked in terms of nominal GDP in 2010 in US dollar). Such a huge economic aggregate provides a new potential market for Chinese enterprises. 39 of the 53 African countries have trade deficit with China. Chinese products are entering the African market. “Made in China” is now popular in the African continent.Chinese exports to the African market are increasingly important， particularly in sub-Saharan Africa(SSA). In 1995， imports from China accounted for less than 5% of the total imports by the top ten economies in the region (ranked in terms of nominal GDP in 2010). The proportion had risen significantly by the year 2009 when over 15% of Nigeria and Angola’imports and over 20% of Sudan and Ethiopia’ imports were from China.Increasing urban population and emerging middle class in African nations mean a huge market not only for Chinese capital goods related with infrastructure construction but also fro consumer durables. Chinese automobiles are replacing second-handed European and Japanese ones as popular choices in Africa， for their innovative styles and low prices. Chinese computers have gradually been recognized. Chinese electronic products and home appliances are sold across the African continent. At a time when Chinese companies strive to occupy a larger share of the global market share， Africa， an under-developed market， is showing strong growth. (To be continued)