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There are several dimensions along which the pattern of Africa’s trade flows with China can be usefully assessed. It is helpful first to nest the analysis within the broader context of African-Asian trade, and then to examine how these flows differ in terms of volume, product composition, and geographi- cal concentration.

African-Asian Trade Flows

The volume of African exports to Asia is growing at an accelerated rate: while exports from Africa to Asia grew annually by 14 percent between 1990 and 1994, they grew by 19 percent between 2000 and 2004 (see table 5-2). Asia is now a major trading partner with African countries. Asia accounts for 27 per- cent of Africa’s exports, an amount that is almost equivalent to the EU and U.S. shares of Africa’s exports, 32 and 29 percent, respectively. However, despite this growth, Africa’s exports still remain relatively small from the Asian perspective: Africa’s exports to Asia account for only 1.6 percent of Asian global imports.

African imports from Asia are also increasing (see table 5-3). Over the last five years, they have grown at an 18 percent annual rate, higher than that of any other region, including the EU. These imports are largely manufactured goods, which have surged into African markets. Some of them are interme- diate inputs for products assembled in Africa and shipped out to third mar- kets, such as the EU and United States, or capital goods (machinery and equipment) for African manufacturing sectors themselves. At the same time, there are also a sizable number of African imports of consumer nondurables from Asia, which compete against Africa’s domestically produced products.

Volume of African-Chinese Trade

The recent growth of African countries’ exports to Asia largely reflects a sharp upturn in Africa’s exports to China (as well as to India, the other emerging economic giant of the South).8_{While Japan and South Korea, in the early}

1990s, were the most important markets for Africa’s exports, China alone accounts for 40 percent of Africa’s total exports to Asia today.

African exports to China have risen dramatically over the past fifteen years (see figure 5-5). China doubled its annual growth rate of export purchases from Africa between 1990 and 1994; during the period from 1999 to 2004, exports from the continent to China grew by 48 percent annually. It is signif- icant that while the growth rate of Africa’s exports to China is high, the vol- ume of sub-Saharan exports going to China accounts for only 10 percent of Table 5-2. Composition of African Exports to Asia,

Ranked by Annual Growth, 1999 and 2004

Units as indicated

1999 2004

Value Value

of exports of exports Annual

(millions Share (millions Share growth

Exports of US$) (percent) of US$) (percent) (percent)

Machinery and transportation

equipment 435 2.3 1,383 3.7 26 Ores 804 4.2 2,377 6.4 24 Petroleum products 158 0.8 401 1.1 20 Electronics 19 0.1 47 0.1 20 Crude petroleum 7,136 37.2 17,113 46.1 19 Pharmaceuticals 5 0 12 0 19 Electronic machineries 36 0.2 71 0.2 15 Other manufactured goods, such

as paper, pulp, furniture 490 2.6 904 2.4 13 Nonpharmaceutical chemicals 520 2.7 955 2.6 13 Basic manufactured metals 4,880 25.5 8,201 22.1 11 Cotton, textile fibers, and yarns 848 4.4 1,423 3.8 11 Manufacturing of non-oil minerals 2 0 3 0 8 Agricultural raw materials,

nonedibles 1,525 8.0 1,970 5.3 5 Processed food and beverages 271 1.4 342 0.9 5 Agricultural raw food edibles 1,437 7.5 1,777 4.8 4 Apparel and footwear 30 0.2 25 0.1 –4 Manufacturing of nonminerals 11 0.1 4 0 –18 Coal 554 2.9 132 0.4 –25 Total 19,159 100.0 37,141 100.0 14

the continent’s total exports worldwide. This is a far smaller level of exports than generally believed.

The leading role of China in African-Asian trade relations is not limited only to Africa’s exports. On the import side as well, China has become a major trading partner for African countries (see figure 5-6). Japan used to be the largest supplier of products that Africa imported from Asia. However, China has taken over the leading position, accounting for more than one-third of Asia’s total imports to Africa.

Product Composition of Africa’s Trade with China

The increase in African exports to China is largely driven by unmet domestic demand for natural resources, reflecting rising consumption by households and businesses in China. At present, petroleum is the leading commodity, Table 5-3. African Imports from Asia, Commodity Group, 1999 and 2004

Units as indicated

1999 2004

Value Value

of imports of imports Annual

(millions Share (millions Share growth

Imports of US$) (percent) of US$) (percent) (percent)

Machinery and transportation 5,241 28.2 12,336 32.3 19 equipment

Agricultural raw food edibles 2,075 11.2 3,947 10.3 14 Processed food and beverages 1,426 7.7 2,997 7.8 16 Pharmaceuticals 1,851 10 3,529 9.2 14 Electronics 1,457 7.8 2,607 6.8 12 Coal 1,220 6.6 2,586 6.8 16 Cotton, textile fibers and yarns 1,228 6.6 2,283 6.0 13 Apparel and footwear 1,165 6.3 2,087 5.5 12 Agricultural raw materials, 1,110 6 2,204 5.8 15

nonedibles

Manufacturing of non-minerals 917 4.9 1,525 4.0 11 Basic manufactured metals 286 1.5 559 1.5 14 Petroleum products 269 1.4 825 2.2 25 Other manufactured goods, 181 1 324 0.8 12

paper, pulp, furniture

Nonpharmaceutical chemicals 102 0.5 210 0.5 16 Ores 35 0.2 78 0.2 17

Figure 5-5. Growth in Africa’s Exports to China versus India and the Rest of Asia, 1990–2004

Source: Broadman, Africa’s Silk Road.

Millions of US$ 14,000 12,000 10,000 8,000 6,000 4,000 2,000 1990 1995 2000 2004 China Japan Korea India ASEAN 5 10 20 30 40

Average annual merchandise export growth rate, Africa to Asia (percent)

China India Rest of Asia 1990–1994 1999–2004 20 48 7 14 _{14 13}

Figure 5-6. Growth in Africa’s Imports from China, 1990–2004a

Source: Broadman, Africa’s Silk Road.

a. Imports are based on partner’s export data, except for 2002 Thailand data, which were based on Africa’s export data.

Millions of US$ 10,000 8,000 6,000 4,000 2,000 1990 1995 2000 2004 China Japan Korea India ASEAN 5 ASEAN 5 17% China36% India 13% Japan 17% Korea 17%

followed by ores and metals. Indeed, oil and natural gas account for 62 per- cent of total African exports to China, and ores and metals account for 17 per- cent (see figure 5-7).

That natural resources currently dominate Africa’s exports to China is part of the larger profile of Africa’s export pattern to Asia and globally. Coupled with the 7 percent share of exports comprising agricultural raw materials, it is clear that the majority of products Africa is currently selling to Chinese mar- kets are unprocessed. Still, Africa’s rapidly growing exports to China are not limited to fuels and other mineral and metal products. As discussed below, labor-intensive, raw, or semiprocessed agricultural commodities for industrial use (timber, cotton) or consumer use (food products) are also increasingly being exported to China.

If Africa’s present exports to China tend to be dominated by natural resources or raw agricultural commodities, its imports from China are typi- cally value-added products (see figure 5-7). Out of all imports from China, 87 percent are machinery and equipment, textiles and apparel, and other man- ufactured products. In fact, African imports from China are more broadly based than African exports to China. Table 5-4 indicates, on a statistical basis, the dramatic difference in the level of product concentration between Africa’s

Figure 5-7. Product Distribution of Africa’s Trade with China, 2004

Source: Broadman, Africa’s Silk Road. Agricultural

raw materials 7%

Oil and natural gas 62% Ores and

metals 17%

Africa’s merchandise imports from China Africa’s merchandise exports to China

Manufactured materials 6% Textile, apparel, and footwear 5% Machinery and trans- portation equipment 2% Processed food and beverages 1% Agricultural raw materials 3% Ores and metals 9% Manufactured materials 18% Textile, apparel, and footwear 36% Machinery and trans- portation equipment 33% Processed food and beverages 1%

exports to and imports from China using the conventional Herfindahl- Hirschman Index.

Geographical Concentration of Africa’s Trade with China

There are also significant differences in the geographical patterns of Africa’s exports to and imports from China. Geographically, Africa’s exports are highly concentrated in a few countries, most of which, except for South Africa, are oil-producing states (see figure 5-8). This is not surprising, of course, given the dominance of oil and natural resources in the continent’s exports to China. By contrast, there is considerably greater diversity among the largest African importers of Chinese goods, although, again, oil-producing countries play a pronounced role. This pattern is confirmed statistically by the Herfindahl- Hirschman Index figures presented in table 5-4.

Coupling Product and Geographical Concentration

The concentrated trade patterns of the product side and the geographical side are intensified when the two are combined. Thus, for example, Angola supplies 50 percent of African oil exports to China, followed by the Sudan (19 percent), Republic of the Congo (Congo [Brazzaville], 16 percent), Equator- ial Guinea (10 percent), and Nigeria (4 percent). South Africa is almost the exclusive supplier of ore and diamonds to China. However, logs and cotton, the two leading agricultural raw materials for industrial use in China, are supplied by a range of countries concentrated in West Africa: Gabon, Republic of the Congo (Congo [Brazzaville]), Equatorial Guinea, Cameroon, and Liberia for logs; Benin, Burkina Faso, Mali, Côte d’Ivoire, and Cameroon for cotton.

On the import side, West African countries such as Niger, Nigeria, Ghana, Togo, Benin, and the Gambia; and East African countries such as Kenya and Tanzania are the major buyers of Chinese cotton fabric exports. China also Table 5-4. Product and Geographic Concentration of Africa’s Trade

with China, 2002–2004 averageda

Herfindahl-Hirschman index

Exports to China Imports from China

Product concentration 0.40 (+0.25) 0.02 (+0.01) Geographic concentration 0.17 (+0.09) 0.09 (+0.05)

Source: Broadman, Africa’s Silk Road.

a. The higher the value of the index, the greater the level of concentration. Figures in parenthe- ses are the difference in index figures from those based on Africa’s trade with the world.

exports synthetic fibers to African countries with relatively more developed light industries, such as South Africa, Mauritius, and Nigeria.

Is Africa’s Trade With China an Opportunity to Diversify?

Although African exports to Asia as a whole do not exhibit a significant pat- tern of product diversification, intersectoral complementarities between Africa and Asia do exist, and in particular between Africa and China. This is true in a general context, where Africa is a large supplier of raw materials to China, including energy resources, and China is a supplier of manufactured

Figure 5-8. Leading African Trade Partners with China

Percent of export or import values in importing country

Source: Broadman, Africa’s Silk Road.

Leading African importers from China Leading African exporters to China

90 80 70 60 50 40 30 20 10 Percent Rest of Africa Gabon Nigeria Equatorial Guinea Congo The Sudan South Africa Angola 90% 90 80 70 60 50 40 30 20 10 Percent Rest of Africa Angola Togo The Sudan Nigeria South Africa 90% Benin Ghana Kenya Tanzania EthiopiaMadagascar Mauritius Côte d’Ivoire Liberia Congo Guinea

products to African countries. This is largely driven by factor endowments. The rich resource endowment in Africa provides a natural comparative advan- tage based on raw materials and resource-based products. China, on the other hand, has a rich stock of skilled labor compared to Africa and, thus, has a com- parative advantage in manufactured products.9

The endowment-based theory of comparative advantage provides a sim- ple, but intuitive, framework to understand the trade patterns of African countries. In light of Africa’s relative scarcity in highly skilled human capital but rich natural resource base, the theory would suggest that it is not eco- nomically efficient for African countries to push for manufactured exports. At the same time, there is a belief that with greater trade between Africa and an emerging economic power like China, Africa’s concentration on primary com- modity exports will increase, undoing any African efforts to promote manu- factured exports. However, the data show that, if anything, manufactured exports from Africa to China, like other parts of Asia, are beginning to increase significantly, as shown in table 5-2.

These data raise the critical issue of the extent to which there are beneficial complementarities arising in commerce between African countries and China. New evidence suggests that China’s commercial engagement with sub-Saha- ran Africa could enable African businesses to build on the continent’s endow- ment of natural resources and develop more sophisticated backward and forward integration to extract more value from processing and increase the participation of local firms in modern global network trade.10_{These oppor-}

tunities stem from linkages between China’s flows of FDI to Africa and exports generated from such investments, particularly when the sectors in which they occur allow for dividing the production chain into its constituent compo- nents across international markets.