Since 2016, news about African traders leaving China has spread. According to analysts, the world commodity price drop rather than China’s economic restructuring is a contributing factor in making African traders leave China.
China’s economic restructuring could be considered to be one of the factors that are driving African traders to leave China. However, the global commodity prices drop does not have an impact on traders’ presence or absence in China. This piece argues that even though China’s economic restructuring may have had an impact on the business interests of African traders, they are not leaving China in large numbers. The small numbers of traders who are leaving are generally more concerned about their precarious stay status particularly due to overstaying. In addition, individuals have also departed because of poor investment decisions that have failed to yield sufficient profits and have resulted in financial hardship.
Although manufacturing bases are relocating to countries such as Bangladesh, Cambodia and Indonesia, among others, these countries are still not as attractive as China for satisfying the needs of traders because of the ease of access to manufacturing facilities and markets in the People’s Republic of China (PRC). Indeed, China has become a trade and “immigration” destination for foreign traders because of the unique advantages it possesses.
Comparative and competitive advantages are based on the cost of production and labour. China’s impressive production capacity is based on a supply of abundant manpower. This has been one of the main drivers that have allowed China to become the world’s factory. In addition, the PRC has become a major trade destination with the establishment of city markets and has consequently become home to many African traders. Besides these attractive advantages, major socio-economic changes in countries that used to be major trade destinations (Thailand, Malaysia, Singapore, etc.) have pushed African traders to venture to places that match their requirements, specifically the reduction of costs and easy access to manufacturing industries and developed markets. This mobility, driven by socio-economic factors, is a strategy that immigrants, including African traders in China, utilise in order to seek not only better business opportunities, but also improved living conditions.
China’s restructuring of its economy and socio-economic transformation has contributed to changing both its political and economic environment. The greater focus on imports rather than exports, as has been the case during the past three decades, has been one of the direct results of economic restructuring in China. Indeed, China’s government has favoured imports over exports in order to boost local consumption as well as develop other sectors of the economy. This undertaking has led to a need to improve purchasing power among the Chinese population. This has consequently contributed to not only a greater cost of living, but also increases in production and labour costs. For example, in November 2017, China’s government decided to cut import taxes on 187 products. These significant policy shifts have affected the presence of African traders in China, who through their businesses, target high profit margins by buying products at low prices that they then mainly resell in African markets.
Delocalisation of companies has a direct impact on traders’ mobility and search for better markets. With delocalisation, new industrial hubs and new markets are created, hence traders’ interest in relocating to places that can offer manufacturing products as well as markets for their businesses.
China has benefited from the delocalisation of foreign companies and has developed its manufacturing industries in addition to creating market spaces for domestic and global traders.
However, these aspects have been detrimental in improving value-chains in China’s industries. Manufacturing bases, including Chinese manufacturing industries, are relocating to places that have the potential to offer affordable costs of production and labour as well as access to markets. Therefore, new destinations in Africa and Asia have been targeted. Through delocalisation, it is in the interests of companies to relocate to new places. Consequently, this is driving traders to move to different countries in order to maintain their business advantage.
Even though renowned companies have relocated parts of their manufacturing industries to countries like Bangladesh, Cambodia and Indonesia, African traders have not followed suit just yet as those countries may not be as attractive as China for the reasons already outlined.
However, in the long run, those countries could become new destinations for African traders as they look for better business opportunities and greater profits.
* Daouda Cissé is an independent researcher based in Montreal, Canada.