Kenya’s dance with the dragon now gets awkward
Kenya seems to have woken up from a long period of slumber during which China got the better of it.
Last week, Kenya uncharacteristically rejected a free trade area agreement between East African Community (EAC) and the Asian economic giant, citing the need to protect its nascent manufacturing industries.
It might as well be the first time Kenya has stood up to China, since it started looking east some 15 years ago.
This came in the wake of a report by Weekend Business which detailed how Kenya’s lack of a China-specific strategy had seen it sink into a trade hole with the world’s second largest economy.
State Department for Trade PS Chris Kiptoo said such an agreement would pose “certain challenges” including the possibility of further widening the Kenya-China trade deficit, with the value of goods imported from China currently estimated at a staggering Sh500 billion by the United Nations.
He was speaking after the Export Promotion Council (EPC) meeting in Nairobi. The PS said it was better for the country to trade with China only under the World Trade Organisation (WTO) rules.
While Kenya, and a host of African countries, have been running around like a head-less chicken, devoid of China-specific strategy, China has been very strategic. Under the auspices of Made in China 2025, or CM2025, China has vowed to become the leading technological powerhouse by 2025.
By 2025, China wants to be self-sufficient in 10 crucial industries, including aircraft, robotics, electric cars and computer chips. And China will not make any concessions on these areas.
Kenya, on the other end, has made crazy concessions which have allowed China to bring into the country products such as onions and fish which can easily be produced here.
However, with President Uhuru Kenyatta’s Big Four agenda, which rides on manufacturing, food security, universal healthcare and low-cost housing, Kenyan policy-makers have finally smelled the coffee. “I expressed our desire for a preferential trade arrangement with China within the constraints of WTO framework because we are not ready for a free trade arrangement,” said Kiptoo, who recently held talks with Chinese high ranking official.
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He said since 25 per cent of Kenyan imports are from China alone, yet less than two per cent of Kenya’s exports go to China, there was need to push for increased exports instead of creating more imbalance.
“There is a lot that the Chinese people are doing here, especially in providing services such as finance, development… and I think we are happy with what,” he said. “But in the area of trade there is a huge imbalance that is making us feel that we really need to see more in the other direction,” he added.
The Chinese have not consumed as much of Kenya’s products as the latter has avariciously spent on Chinese goods. At Sh9.9 billion, exports to China in 2017 were dismally low compared to imports of Sh390.6 billion, according to the Kenya National Bureau of Statistics (KNBS).
Consumer goods such as onions, clothes, toilet paper and cement that can, and have been, easily produced locally have also been shipped en masse from China.
The textile industry, on which President Uhuru Kenyatta has anchored his Big Four Agenda, has been the hardest hit. Imports increased more than ten-fold to Sh134 billion in 2016 from Sh12.6 billion 10 years ago, according to figures from the United Nations.
Kenya, the home of the Chandaria Industries and other toilet paper-makers, also imported tissue worth Sh5.6 billion in 2016 from China. Perhaps the biggest wound has been importation of fish from China, a revelation that kicked off a huge outcry from areas that rely on fishing such as Nyanza. Even as the country’s fish industry struggled, Kenya imported non-fillet frozen fish worth Sh3.04 billion in 2016.
Zhou Yuxiao, a Sino-African relations envoy who visited Kenya last month, said China would be holding an International Import-Export expo in Shanghai. “Which means we want to buy as much as possible, and I think we are planning to import goods worth $50 billion (Sh5 trillion) from the rest of the world. And if you have anything to export to China, exhibit your products to the Chinese people,” said Yuxiao.
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However, he insisted that striking absolute trade balance was not possible at the juncture. “I think at the very beginning the trade imbalance is unavoidable, in the long run you try to re-balance it. How? Industrialisation. When you build a railway you borrow money, but when the railway is built it produces the opportunity for you to engage in industrialization,” said Yuxiao.