China playing trade and financing dynamics on African countries—Chief Economist Chifipa Mhango

Heads of States at the China-Africa Summit

* In 2023, Chinese imports into Malawi was US$546.12 million — that is the value of Chinese market access into Malawi economy

* On the other hand, Malawi exports to China was US$54.43 million, that is Malawi market access value into Chinese economy in 2023 — The net trade is thus in favour of China at US$491.69 million

By Duncan Mlanjira

South Africa-based Malawian Chief Economist, Chifi Mhango, who is director of economic research & strategy for his host country’s Don Consultancy Group, shares his insights on “trade and financing dynamics” that the People’s Republic of China “is playing on African countries”.

He took the case of Malawi as an example, following the announcement of a MK50 billion financing that President Lazarus Chakwera secured on the sidelines of the Africa-China Summit 2024.

Mhango said: “If one uses an approximate exchange rate of MK1,800 to the US$, that is equivalent of US$28 million loan from China. In 2023, Chinese imports into Malawi was US$546.12 million. That is the value of Chinese market access into Malawi economy. 

“On the other hand, Malawi exports to China was US$54.43 million, that is Malawi market access value into Chinese economy in 2023. The net trade is thus in favour of China at US$491.69 million.

“Now bring in the loan of US$28 million that Malawi is celebrating to have secured from China, that is equivalent to 5.7% of China’s net trade benefit into Malawi, which in real cases is almost guaranteed for next five years, and most likely to grow.

“So as long as trade between Malawi and China is to the benefit of China, this 5.7% loan or financing rule will apply. In summary, China is making money on Malawi through trade and also through interest on loans. 

“As long as countries such as Malawi do not embark on industrialisation of its own economy and create its own products based on import substitution approach, Malawi will forever be a 5.7% baby to China.

“The stance for countries such as Malawi in negotiations should not be short-term based such as looking at US$28 million loans, but rather seek Chinese direct investment into Malawian manufacturing landscape to support the diversification of Malawi export basket to close this trade gap of US$491.69 million.

“Our way of doing things must have a new approach,” said the Chief Economist, adding: “My advice to African leaders, next time you visit China, go there as a team and not inviduals.

“You can even have regional economic blocs positions such as Southern Africa Development Community (SADC) etc, since you are already divided at continental level.

“Meet the Chinese President with all of you in the same room and tackle the issues openly on trade imbalance and industrialisation support as a team.

“China has a population of 1.4 billion people and Africa also has a population of 1.4 billion people. If you go in as individuals, it’s like a country of 19 million people wanting to bring down a country of 1.4 billion people. 

“You have no water and electricity for your majority of your population, and you expect you can think properly in a meeting? Even a sandwich offer in a meeting can delight us due to high poverty levels. 

“China is a continent and not a country. We must change our strategy — unity is key in dealing with global economic powers,” he said.

A report filed yesterday by Malawi News Agency (MANA) in Beijing, quotes President Chakwera as describing the China-Africa Cooperation as a highly successful summit, saying it has exceeded his wildest dreams as it produced tangible results that would help transform Malawi in areas that need support — including infrastructure development, trade and agriculture among others.

“It was pleasing and exciting to note that China has opened up its huge market with 1.4 billion people as Malawi will take advantage of this with our agriculture, tourism and mining (ATM) key priority areas to get a slice of the cake to achieve our much-needed development goals.

“We will take up the initiative focusing on agriculture mechanisation, modernisation, industrialisation, and value addition to create a base for driving up our export potential.”

The President was further quoted as saying he was going back home a happy person and would not rest on his laurels but make sure that Malawi claims a fair share of the cake as promised by Chinese President Xi Jinping.

Delivering his keynote address during the opening session of the Summit, Xi Jinping promised that China would open up its huge market to African exports and also provide support to Africa in 10 technical areas to help improve trade and cooperation between China and Africa as well as offering over US$51 billion to support implementation of the specified areas.

Xi Jinping said “to implement the 10 partnership actions, the Chinese government will provide RMB360 billion yuan of financial support through the next three years. This breaks down into RMB210 billion yuan of credit line, RMB80 billion yuan of assistance in various forms, and at least RMB70 billion yuan of investment in Africa by Chinese companies.

In addition, China will encourage and support Africa in issuing panda bonds in China to enhance our results-oriented cooperation in all areas.—Reporting for MANA in Beijing by Chikondi Chimala