Expanding the Role of African Firms In China’s Export Development

While there are a plethora of techniques that contribute to the success of a business and its operations in China, the often overlooked opportunity represented by public-private partnerships is one that private enterprises should not forgo when they begin the complex journey of navigating the Chinese market. While many entities have been established to facilitate the role of promoting these public-private partnerships, they often do not provide the proper incentive for private companies to engage with them. How can the further development of such partnerships aid the growing number African businesses looking to increase their engagement with Chinese companies?

At its core, the idea that the private sector should work together with the public sector on developing its international export and other related strategies seems obvious. However, the adoption of this approach is often very limited. In 2009, the International Trade Center (ITC), released a statement that has strong resonance in the current economic climate at the 2009 International Trade Forum.

In the midst of the 2008 financial crisis, the ITC conveyed the idea that, “A strong, united voice from the private sector is vital to promote the importance of trade in national development plans.” Considering the current economic turmoil that is affecting global markets, African countries must continue to build upon their existing public-private networks and partnerships to expand their opportunities.

Kenya’s ultimate success in gaining access to the Chinese avocado market is an example of successful cooperation between the public and private sectors. In order to export fresh produce to markets such as China, a “protocol of phytosanitary requirements” must be signed by the importing and exporting countries’ governments. Kenya, a country famous for their Hass avocados, signed a protocol in 2019 to formally begin exports of their avocados to China. China imported $11.9 billion worth of avocados in 2014. However, imports skyrocketed to $133.4 billion by 2018, with increasing interest in this healthy product among Chinese consumers.

Successful negotiations with Chinese authorities, spearheaded by the Kenyan Government, coupled with the private sector’s efforts to develop strong export capability, resulted in Kenya joining a small group of countries with this protocol, becoming the only African country allowed to export the product to China.

China offers a vast market, however with certain commodities, a combination of state-led interventions and export-readiness in the private sector are needed to show that Africa has the capacity to service the growing demands of the Chinese market. Successful partnerships will furthermore enable Africa to meaningfully diversify its exports beyond metals and minerals into agriculture, and potentially more value added goods.

China’s economy grew by 3.2 percent in the second quarter of 2020. Following the contraction of 6.8 percent in the first quarter, growth in the second quarter surpassed expectations. China has shown growth stronger than expected due to the Chinese Government’s efforts to increase domestic spending, such as opening provincial borders for Chinese travelers. China had a domestic tourist market of 5.73 trillion yuan ($824 billion) in 2019, representing almost 6 percent of economic output for the country. Growth in sectors such as tourism will play a role in China continuing to report positive growth for the second half of 2020.

Key Economic Indicators

The consumer price index (CPI) rose by 2.7 percent year-on-year in July 2020, 0.3 percent higher than June’s 2.4 percent. The producer price index (PPI) fell by 2.4 percent year-on-year, after a decline of 3 percent in June. Food prices rose by 13.2 percent year-on-year with pork prices up 85.7 percent. With China’s positive recovery leading to the revival of domestic industries such as catering and tourism, demand for pork increased in line with national efforts to boost consumer spending in industries affected by the epidemic.

Expanding PMI

China’s official purchasing manager’s index (PMI) continued its expansionary growth with the July reading of 51.1. This follows the expansion to 50.9 in June. Exports of electronics and medical goods are expected to contribute to continued expansion in manufacturing. The first half of 2020 saw exports of medical equipment increase by 46.4 percent in the country. Flooding along the Yangtze River impacted millions of Chinese citizens, as well as production lines and supply chains.

Countdown to CIIE

Shanghai Customs announced 14 measures to help exhibitors attending the Third China International Import Expo (CIIE) in November. China has instituted stringent regulations to ensure the safety of attendees at the event, with the measures announced by Shanghai Customs aimed at easing exhibitors’ concerns over viability and success in November. The measures include tax guarantees on imported goods, as well as special customs and logistics services for after-event sales. CA

Rural E-commerce Expansion

China’s e-commerce sector expanded steadily in rural areas during the first half of the year, with rural online retail sales rising 5 percent year on year to 766.85 billion yuan ($109.86 billion), according to the Ministry of Commerce.

E-commerce has played a positive role in facilitating poverty alleviation and boosting rural vitalization, the ministry said.

The country’s online sales of agricultural products totaled 193.77 billion yuan ($27.76 billion), surging 39.7 percent year on year.

China has been promoting the development of e-commerce in rural areas in recent years, as it can boost household consumption, reduce inequality and bring to rural residents the convenience, variety and low prices enjoyed by urban dwellers.

Financing for Small Firms

The People’s Bank of China, the central bank, has stepped up countercyclical adjustments and launched multiple, innovative monetary instruments with direct access to small businesses to stabilize enterprises and secure employment, according to Yi Gang, the central bank governor.

Yi urged various departments of the central bank to conduct serious research into the problems regarding small business financing to further improve the implementation and effectiveness of targeted monetary policy.

China’s banking sector had deferred payments on $258.1 billion of loan principal and interest for a number of micro, small and medium-sized enterprises through measures including loan extension and renewal.

Capital Market

China will further open its capital market and streamline channels for foreign investors, the country’s top securities regulator said.

The country will continue to open up markets, industries and products to foreign investors while simultaneously stepping up oversight to forestall risks, the China Securities Regulatory Commission said in a statement.

The regulator will step up cooperation with other countries in capital market oversight and implement reform measures, it said.

While pledging to trim unnecessary regulations to let market forces play a bigger role in the capital market, the commission vowed “zero tolerance” to illegal activities such as insider trading and financial fraud.

Smart Infrastructure

China will promote the construction of new infrastructure projects in the transport industry, aiming to advance the sector’s transformation toward digitalization and intelligence, according to a guideline issued by the Ministry of Transport on August 6.

By 2035, China aims to achieve remarkable results in the field, with advanced information technology playing a key role in empowering transport infrastructure, the document said.

The country will set up data centers and network security systems for the sector, while gradually promoting the application of smart trains, self-driving vehicles and smart ships.

Vowing to expand the application of new energy and new materials, the guideline also put forward building smart roads, intelligent railways, smart ports and civil aviation, among others.

Property-insurance Development

China’s top insurance regulator on August 6 unveiled a threeyear action plan to promote the high-quality development of the property-insurance industry.

By 2022, China aims to forge a complete market system for the property-insurance sector, with the further enhancement of its service capabilities and financial strength, according to the document issued by the China Banking and Insurance Regulatory Commission.

China’s property-insurance market has been transitioning from fast growth to high-quality development, increasing the urgency of strengthening top-level design and rolling out overall regulations, the plan says.

Efforts will be made to improve the governance of insurance firms as well as to boost innovation in the sector and its ability to serve national economic and social development. CA

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