Aurelia Baaba Ofori
Writer: Aurelia Baaba Ofori, Head, Africa China Trade Banking, Stanbic Bank
Conventionally, the narrative around China frames the country as a predominantly export based economy due to its enormous manufacturing capabilities. As factual as this may be, China’s sheer population makes it an alluring destination for exporters.
With a current population of over 1.4 billion, representing 18.47% of the total world population, China is no doubt the most populous nation in the world with an estimated working population of 733.5 million larger than US and Europe combined.
It is also reported that only about 11% of China’s population is considered middle class with less than about 2% of its workforce being able to pay income taxes. This shows the unending opportunities that lie in China’s market.
According to Statista’s market data, China’s value of imports is estimated around 2.72 trillion in 2022, making it the second largest importing country worldwide as well as the largest trade destination in the world and an import hub for exports. Imagine having 1.4 billion mouths to feed, and an unending duty to produce for the world to consume.
The demand for products is diverse and enormous ranging from crude oil, gold, iron ore, copper, petroleum gas, agricultural products such as soya beans, oils, cashew, cotton barley, rubber, fruits, vegetables, dairy products and recently cassava.
China is also estimated to be the largest consumer economy and expected to grow by 25% more than the global consumer growth rate. As incomes of China’s working increases so will the purchasing power increase. This will have a significant effect on the global economy in consumer market.
What this data implicitly tells us is that if you produce and it meets the required standard, China will consume. It is therefore critical that countries that are looking at scaling their export industries and boosting economic growth have to seriously consider the import potential of China.
Ghana, for example, can position itself strategically to become a trade ally to China, specifically in the exportation of Ghana’s agricultural products. Data show that China currently is the biggest importer of cassava from Thailand to feed its industries. They produce ethanol from cassava, modified starch for papermaking and the textile industry.
Cassava is the new gold for Ghana yet not much has been done to develop this product for the international market. Taking advantage of this opportunity will be key in enhancing Ghana’s agriculture value chain.
Again, China Despite China’s notoriety of being a country of producing and manufacturing and known for its trade surplus it has always been a net importer of agricultural products for almost a decade. Agricultural related products including fruits and vegetables, dairy, pork, Soyabeans, corn, wheat, rice and acholic beverages are imported into the country more than any other country in the world.
Ghana with its abundant arable lands could start looking at empowering investors to enter into commercial agriculture to feed the world.
One will ask why we must explore opportunities in China in the face of ongoing efforts to enhance trade between and among African countries through the opportunity provided by the Africa Continental Free Trade Agreement (AfCFTA).
AfCFTA seeks to connect the 1.3 billion people across 55 African countries with GDP of over $3.4 trillion according to the World Bank 2022 AfCFTA Report.
There is a lot of work to be done by Ghana to influence this space.
To be relevant in this space will require a deliberate attempt to improve infrastructure, manufacturing value chains, digitalplatforms and technical capacity of businesses to produce at a cost-effective manner in copious quantities to meet the demands of the intra Africa trade.
There is some apprehension when the word ‘import’ is mentioned in Ghana. Yes, the country is currently import dependent and we need to change the narrative.However, no country in the world has done away with importation entirely. It is what we import that makes it concerning.
If Ghanawants to be relevant in AfCFTA we have no choice than to import machinery and raw materials to be able to rapidly feed the industries for production. This means we will still need to import, however, what we import will be different than the norm.
China offers us the choice of cost- effective machinery and raw materials for Ghana’s intended industrial growth. China is considered the ‘factory’ of the world and the second biggest exporter in the world, yet they import too.
Only that they are net exporters. They export more than they import. Ghana could learn from that too. The point being made here is that as we export into other African markets, we should not forget that we can leverage the capabilities being built to take advantage of other international trade corridors such as the Ghana China one.
After all, as you grow industries, you will need machinery, as you improve manufacturing you will need raw materials, as you seek to export you will need distribution/logistics channels for road, air and sea transportation. In all of this, leveraging China for Ghana to dominate AfCFTA will be a brilliant idea.