COVID-19 Presents Opportunities for Africa to Enhance Trade With China

The COVID-19 pandemic has left the world’s economies fraught with uncertainty on how to best position their markets once the outbreak has been brought under control. While China has successfully contained the spread of the virus within its borders, the challenge of reopening its economy involves numerous complexities, with industries reliant on international exposure unable to operate optimally.

As high-level governmental bodies in China are charting a course to recovery, their commitment to African partners has been clear. Therefore, while Africa is making its own efforts to control the spread of the virus, leveraging an already strong relationship with China should be high up on the POST-COVID-19 economic recovery agenda for Africa.

China hosted its annual Two Sessions at the end of May, after an almost two-month postponement due to the epidemic. Many looked to this meeting to gauge what further measures China will take toward a successful economic recovery, with the country’s top legislators meeting for the weeklong talks. Emphasis was placed on China’s continued role as the world’s largest market, as well as the need for continued resource allocation for international endeavors such as the Belt and Road Initiative.

Prior to the Two Sessions, Chinese President Xi Jinping announced that China will provide $2 billion to help developing countries with economic and social development in their

POST-COVID-19 recovery. Given Africa’s strategic relationship with China, the continent is certain to benefit from this.

This close relationship extends to trade, where Africa has enjoyed a special trading partner status with China. In 2019, China gave special status to certain African countries at the China International Import Expo in Shanghai. In the same year, the inaugural China-africa Economic and Trade Expo took place in Changsha.

Africa’s exports to China have been extensively resourcebased, but the introduction of a more diverse range of exportready African products at these events has triggered an interest among buyers from the Chinese market in products such as Kenyan tea. Showcasing a broader range of product offerings from Africa for which there is a market in China has been advantageous for many African sellers and acted as a platform that enables them to take advantage of the opportunity presented by China’s shifting trade relations with other international markets.

Countries around the world are reevaluating their economic positioning and relationships as they take stock of the losses sustained due to the pandemic. Africa, however, has reaffirmed its continued focus on the Chinese market, as years of investment from China has seen the cultivation of capacity in many industries in Africa, making them key suppliers to China. By leveraging existing trade relations with China, Africa can aid its recovery in a POST-COVID-19 world.

China held its annual Two Sessions at the end of May after they had been postponed due to the effect of the COVID-19 epidemic. The Two Sessions, the annual meetings of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference, ended without setting a GDP growth target for China. This is an indication of persisting uncertainty about how significantly the pandemic will ultimately influence China’s growth in the second half of the year, as this depends on global containment of the disease.

Key Economic Indicators

The consumer price index (CPI) rose by 2.4 percent year on year in May 2020. The producer price index (PPI) fell by 3.7 percent year on year. Food prices grew by 10.6 percent year on year, with rising pork prices contributing fundamentally to the increase. African swine fever has ravaged the pig population in China for several months, requiring the country to import a record 400,000 metric tons of pork in April to offset the short supply. Pork prices rose by 81.7 percent year on year in May.

PMI Expands

The purchasing managers’ index (PMI) for China’s manufacturing sector eased to 50.6 in May from 50.8 in April. Following the record decline in February at 35.7, China’s manufacturing output has returned to PRE-COVID-19 levels, strengthened by measures taken by the Chinese Government to stimulate a sector hard hit by decreased global demand. Exports fell by 3.3 percent in May, following a slight gain of 3.5 percent in April. China’s imports also saw its biggest decline in four years, with a decrease of 16.7 percent year on year.

G7 Summit Delayed

The G7 countries, comprising of Canada, France, Germany, Italy, Japan, the UK and the U.S., were scheduled to have an in-person meeting on June 10-12. However, growing concerns over health risks led the host nation, the U.S., to postpone to a later date. U.S. President Donald Trump expressed his desire to include Australia, India, South Korea and Russia in the meetings. The leaders of the G7 are expected to convene later this year once health risks associated with travel are lessened. CA

Growing Auto Sales

China’s auto sales in May are estimated to reach 2.14 million units, up 11.7 percent year on year, indicating a growth for two consecutive months in the country’s auto market, an industry association said.

In April, the domestic auto market reported a 4.4-percent growth in sales from a year earlier, according to a report from the China Association of Automobile Manufacturers.

The figure brought the total sales in the first five months to nearly 7.9 million units, down 23.1 percent year on year.

Large scale sales promotions and a series of favorable policies during the May Day holiday led to the rebound of customer flows and sales, said the association.

Outbound Investment

China’s non-financial outbound direct investment (ODI) climbed by 0.7 percent year on year in the first four months of this year, official data showed.

China’s non-financial ODI in 155 countries and regions stood at about $33.08 billion during the period, according to the Ministry of Commerce.

Chinese companies increased investment in countries participating in the Belt and Road Initiative during the first four months, adding a total of $5.23 billion of new investment in 53 countries, up 13.4 percent year on year.

Non-financial ODI into ASEAN countries jumped by 43.3 percent year on year to reach $3.94 billion during the period.

China’s investment mainly went into sectors including leasing and business services, wholesale and retail as well as manufacturing, according to the ministry.

Stable Job Market

China’s job market remained generally stable in May, with the surveyed unemployment rate in urban areas standing at 5.9 percent, official data showed.

The figure went down 0.1 percentage point from the previous month, according to the National Bureau of Statistics (NBS).

A total of 4.6 million new urban jobs were created in the first five months of 2020, down 1.37 million compared with the same period of last year.

Small Businesses

China will take further steps to expand the scale and improve the structure of financing for micro, small and medium-sized firms, according to an official guideline released on June 2.

Banks operating nationwide are urged to offer reasonable rate concessions to widen credit coverage and reduce comprehensive financing costs for small businesses, said a guideline jointly issued by authorities including the central bank.

The five major state-owned commercial banks should expand their inclusive lending to micro and small firms by more than 40 percent, while development and policy banks should make full use of the $49 billion special credit line to support the resumption of work and production for small firms with preferential interest rates.

The guideline encouraged commercial banks to substantially increase loans to smaller firms and extend their loans without requiring the repayment of due principal.

Foreign Trade Companies

China’s Ministry of Commerce (MOFCOM) on June 10 pledged measures to help foreign trade businesses tide over difficulties as the sector faced “unprecedented” challenges due to the novel coronavirus pandemic.

Despite lockdowns easing in some countries and regions, it will still take time for the demand to recover as there are increasing uncertainties in global trade, MOFCOM official Zhang Li said at a press conference.

To stabilize foreign trade and investment, China has introduced a string of measures including financing support and simplified procedures.

The government has also increased focus on fostering new trading models such as cross-border e-commerce.

In addition to setting up 59 cross-border e-commerce pilot zones, China has approved 46 new ones and exempted retail exports from value-added tax and consumption tax in all pilot zones, while encouraging companies to jointly build and share overseas warehouses. CA