Some weeks ago, in the second week of October, an IMF report showed China overtaking the United States as the world’s largest economy. The UK Daily Mail stated in its October 9th edition, “America usurped: China becomes world’s largest economy – putting USA in second place for the first time in 142 years”. ‘’The IMF figures showed the Chinese economy is worth $17.61 trillion compared with $17.4 trillion for the USA. China – whose wealth has accelerated in recent decades amid rapid industrialization – is expected to extend its lead, with the IMF estimating its economy will be worth just under $26.98 trillion in 2019. That would be 20 per cent bigger than the U.S. economy, which is forecast to be worth $22.3 trillion by then.” The new Chinese standing was helped by the fact that the IMF made the evaluation based on ‘Purchasing Power Parity (PPP)’, which adjusted for the cost of living in both countries. PPP measures the actual output as opposed to fluctuations in exchange rates.
The rise of China has been a source of interest everywhere, not just for the country’s ideological roots, which fairly contrasts with its global capitalist outlook but for other issues relating to its global trade practices and the haze over its ultimate global goal. These concerns have triggered talk over the real interest of China in developing countries, especially in Africa. China is providing low interest loans for infrastructure in Nigeria and other African countries. China is also a leading player in global trade today and Africa’s largest trading partner. As at 2012, China – Africa trade was $198.5 billion, compared with $99.8 billion for US – Africa trade. Though this figure is less than five per cent of China’s global trade, over 80 per cent of its imports were primary products, comprising mineral resources, wood, metals and glass. On the other hand, African imports from China have been mainly machinery and electrical goods, textiles, transportation goods, rubber and plastics. Chinese businesses have been on the continent for decades, many of them in extractive industries and light goods manufacturing, with regular complaints of exploitation and labour-related issues.
A number of persons have posited that the relationship between China and Africa needs to be thoroughly examined so that it does not become one between a master and the colony like it was in colonial times. The position essentially is that China is naturally in competition with any African country that is at the industrial take-off point because China exports manufactured goods for our primary exports.
These concerns, mixed with fears of competition in the recent years, have triggered the debate over the dangers of the nature of Africa’s partnership with China.
Nigeria’s trade with China is not much different from the general African scenario. Nigeria was China’s third largest trade partner in Africa as at 2013, helped largely by new contracts in transport infrastructure and oil concessions. Trade between both nations which stood at $2 billion in 2002 rose to $13 billion in 2013. The Chinese are working on Nigerian rail projects and several road constructions. Increasingly, China is exporting manufactured goods to Nigeria, largely because they are cheaply produced and fill a gap for our economy, which has a higher cost structure on account of infrastructure gaps. But there are growing fears that the Chinese trade invasion may cause damage to our struggling nascent industrial sector. Nigeria is still struggling to find its feet in the production of low technology domestic goods, an area that Chinese firms master already and are dominating even locally. Chinese firms are active in pushing low and sometimes substandard goods into the country and therefore stifling local attempts at import substitution. Interestingly, China incubated its industrial development by running a tough policy of import substitution. Our bilateral agreement with China cannot emphasise less. Several companies have shut down on account of cheap imports from China including companies in the textile sector.
In launching Nigeria Industrial Revolution Plan in January this year President Goodluck Jonathan said, it “is our national roadmap for real industrialization. It is already a living vision, as many elements of its implementation have since commenced. The goal is simple: to add about NGN 5 trillion to annual manufacturing revenues in the next three to five years. This will create jobs, generate wealth, diversify our economy, substitute imports, boost exports, and broaden our tax base. The NIRP has a limited time-frame within which we will accelerate industrial capacity”. In articulating the basis for the plan, the NIRP posits, “in today’s world, the fierce global competition has reduced the likelihood of spontaneous development of new Industry. Countries must therefore have a deliberate, precise, and intense approach to nurture and expand Industrial activities. This is even more paramount for a country like Nigeria, starting from a relatively low manufacturing base.” One of the sub goals of the NIRP is to be “The preferred source for supplying low and medium-technology consumer and industrial goods domestically and regionally.”
Many analysts believe that lessons from China provide the best template for African countries to develop their industrial sector. David Dollar, an expert at The Brookings Institution, one of USA’s leading think tanks says, “African countries might want to consider China’s domestic experience with FDI, and how China placed high requirements for foreign companies to transfer their technologies as well as strict limitations on visas for foreign workers at joint ventures in China, forcing non-Chinese companies to train and invest in local employees.” In fact Chinese officials tout this as a potential benefit of the trade relations between China and Africa. Yet, to achieve that China and Nigeria must work out and follow through a trade agreement that gives us space to grow. China’s exports are growing beyond infrastructure projects to low-technology manufactures and even though the volume may be a small portion of their exports, it is capable of squelching whatever efforts we make at industrialization. No bilateral trade relations should cost us the opportunity to grow and diversify our economy. The textile sector and several other low-technology industries, would have to be protected from cheap imports from China and elsewhere, else Nigeria would end up holding the short end of the stick in these trade relations.
In truth, part of the problem are our institutions, they are weak and seem infirm in tackling the invasion of cheap, substandard goods from China. Even as the Nigerian Industrial Revolution Plan is implemented and trade deals are struck, retooling our trade and monitoring institutions to be more business-like and patriotic cannot be under emphasised. On the whole, it is the determined implementation of the laws that sets the tone for good conduct. One lesson from China may help us as we seek to build capacity. Sometime in late October 2008, adulterated baby formula in China killed six infants with several thousands more hospitalised. To deal with the problem, investigations were made, the culprits identified and expeditiously prosecuted. Daily, reports of adulterated products from China and elsewhere confront us without commensurate action.
In redefining Nigeria-China trade relations, the overall emphasis must be on advancing Nigeria’s national interest, especially as it relates to our social, industrial and economic goals. Here, we must learn lessons on China’s rise to the top of global commerce, which was enabled by emphasis on stable policies, aggressive investment drive, very aggressive defence of local industries and strict implementation of laws.
Chief Bernard Okumagba is Chairman of Regents Consults Limited and a former Delta State Commissioner for Finance
