Kenya bets big on China

The Chinese government plans to construct several goods distribution centres in Africa to push its products on the continent. Kenya, meanwhile, is lobbying to have one of the logistics centres in Nairobi.

The centres are expected to intensify interaction between Africa and China and with it, Kenya expects to bridge the trade gap that favours China.

“We have requested them they make Nairobi one of the logistics centres,” Kenya’s external trade secretary Simon Chacha told Smart Company in Shanghai.

“With a logistics centre in Nairobi they will be able to distribute to East African Community and Comesa with a total population of 300 million people.”

China plans to allow Kenya sell its commodities in Yiwu city.

“They want to give us a commodity centre,” Mr Chacha said. “This will enable Kenyan exporters who have products targeting China to take them to the city and distribute.”

Yiwu is famous in China as a commodities centre. Its China Small-Commodity Market has for six consecutive years topped China’s 100 top open markets and was for successive years listed as the country’s civilised open market. It has been named as the banner of China’s market economy and with a large variety of quality but cheaper commodities, the market has become a shopping paradise for tourists.

Trade between Kenya and China is heavily in favour of China. In 2009 Kenya exported goods worth $35.6 million (Sh2 billion) but imported goods worth $1 million (Sh80 billion).

“The exhibition will be used to increase Kenya’s competitiveness and to help use improve the ratio, which is today lopsided in favour of China,” Trade minister Chirau Mwakere told reporters at Expo 2010 Shanghai China.

Kenya continues to push traditional products such as tea, coffee and cutflowers. But China is not key market for cut flower. Tea Board of Kenya Managing Director Sicily Kariuki said China is still a significant importer of tea, importing one million kilos in 2009.

"This might look as small amount but if you look at it terms of growth, it is an increase from 400,000 kilos in 2004,” she said.

Mrs Kariuki said that although Chinese prefer green tea they are slowly taking “milky teas” as its middle class increases in tandem with economic growth. In Hong Kong, which is more open than the mainland China, growth for tea is much higher.

Tea exporters have to contend with 15 per cent import duty charged by China. Mr Chacha said because Kenya is not a least developed country, China says it cannot reduce the duty without roiling the World Trade Organisation.

Under the WTO agreements, countries cannot discriminate between their trading partners by granting a special favour, such as a lower customs duty rate for one of their products. However, countries are allowed to give developing countries special access to their markets.

With the growing significance of China in the world becomes more clearer, countries are aligning themselves to benefit from this growth. A report by the United Nations released last week shows that China continues to be an attractive destination for foreign investors and gains significantly from the overall improvement in the investment climate.

The nation’s economic fundamentals and investment policies are on the right track, United Nations Conference on Trade and Development (UNCTAD) said in the World Investment Prospects Survey. It is considered to be one of the most reputed surveys on the global foreign direct investment and was first launched by UNCTAD in 1995.

Labour competitiveness and raising domestic consumption are the mainstay of foreign direct investment and that is what will propel investments from abroad, they said. During the first seven months of this year, the nation’s FDI rose 20.7 per cent year-on-year to $58.35 billion.

Last week, Chinese Commerce ministry officials said that domestic consumption this year could be around $2 billion, due to the huge population and other measures to stimulate imports.