Energy minister Kiraitu Murungi (left) talks to Chinese ambassador, Mr Deng Hongbo, during the launch of oil exploration last year. Photo/FILE
Chinese exports to Kenya grew steadily in the first nine months of the year at the expense of the US and India, reflecting the shift in trade ties behind America’s rising concern over China’s growing power in East Africa’s largest economy as recently revealed in leaked diplomatic cables.
The near tripling of Beijing’s imports to Kenya compared to those of the US is expected to heighten discomfort in Washington, where China’s rising influence in Africa is closely being monitored.
Chinese companies shipped into Kenya goods worth Sh82 billion by September this year, an increase of 52 per cent from the Sh54 billion bought over the corresponding period last year, according to data from the Kenya National Bureau of Statistics (KNBS).
In contrast, imports from the US declined by almost a fifth - 18 per cent - from Sh33 billion to Sh27 billion during the period under review.
Last year, US exports to Kenya stood at slightly less than half of Beijing’s, with the Economic Survey 2010 showing that Kenya imported Sh33 billion worth of goods from the US in 2009, compared to China’s Sh73.5 billion during the same period.
“Chinese products are competitive on three fronts, cost quality and delivery compared to those from the US,” said Vimal Shah, the managing director at Bidco. “As China makes all efforts to dominate Kenya’s trade, this should be a wake-up call that it is taking advantage of the high cost of production in Kenya which has made our goods less competitive,” said Mr Shah.
The US and local manufacturers fault Beijing for the continued flooding of the Kenyan market with substandard goods, an indication that Washington sees the goods as negating its economic interest in the same market.
Local manufacturers have complained of the same damage, which the US has tried to fix by pushing for the enactment by Kenyan parliament of anti-counterfeiting laws.
Growth in China’s dominance of trade with Kenya is likely to deepen an intense but silent battle for control of Third World countries with strategic importance such as Kenya.
Washington and Beijing are drawn together by economic and diplomatic interests, but the partnership has been beset by frequent friction over Internet policy, Tibet, US arms sales to Taiwan, China’s currency fixing and Chinese territorial claims in the disputed South China Sea.
Diplomatic cables released by Wikileaks earlier this month revealed how closely the US has been monitoring China’s activities in Kenya, especially in trade, military and intelligence relations.
“Any increase in Chinese dominance directly reduces this US influence,” said Macharia Munene, an international relations scholar at the United States International University (USIU).
“China has made the record clear that it wants to control the World’s trade and diplomacy and this war is being fought in both developed economies and third world nations, “ said Prof Munene.
China is the second largest source of non-oil imports to Kenya after the United Arab Emirates, having elbowed India into the third position.
Chinese exports to Kenya are mainly made up of machinery, household electric appliance, textiles, fertiliser, building materials and drugs but has in the recent past increased its products to virtually almost any other manufactured products.
US companies export telecommunications equipment, aircraft and aircraft parts, military equipment, textile, fertiliser, computers and accessories, among others.
While the US blames the artificial valuation of the Chinese currency - the Yuan - for its loss of market presence in many regions of the world, low costs of production has been a key factor in driving the consumption of merchandise from China.
It is estimated that it costs 25 per cent less to manufacture goods in China compared to the US, helped in part by low labour costs and less stringent regulations.
It has taken China just four years to turn the tables on the US, which in 2006 exported Sh39 billion worth of goods to Kenya, Sh7 billion more than China did.
During the four years, China has brazenly taken opportunities in Kenya’s vast infrastructure and natural resources sectors.
The waning importance of the US in Kenya’s commercial sector is expected to make it increasingly difficult for the US to push through its diplomatic and global security agenda in East African largest economy at a time when a referendum on cessation of Southern Sudan threatens stability in the Great Lakes region.
For instance, the US has been reduced to curbing the travel rights of prominent Kenyan public officials in its push for good governance and political reforms without withholding bilateral financial support, a key lever in the superpower’s carrots and sticks policy in recent years.
In the nine months to September, the US banned 15 Kenyan officials including ministers, parliamentarians and top-ranking civil servants from travelling to the US or conducting business with the US. The ban was supported by foreign diplomats in Kenya including Canada.
“The US has many reasons to worry over the growing Chinese influence in Kenya, given its strategic leadership role in the East Africa and beyond. Bilateral trade is nevertheless as crucial,” said Dr Herman Manyora, a lecturer at the University of Nairobi.
In the past, US perceptions have influenced actions on Kenya by financiers like the IMF and World Bank and other developed economies.
US President Obama has sent repeated messages to Kenyan leaders to move on with the reforms targeting the judiciary, the formation of an independent permanent electoral commission and the formation of an international court to try post-election violence plotters.
The US has also been on record warning that it would scrutinise any proposals for financial assistance to Kenya, under the international financial institutions, as part of its actions against the lack of progress in Kenya.
However, China’s decision to remain neutral on local politics has been seen as one of its selling points for the close ties it has been able to build with Kenya and other African countries.
“Kenya’s leadership may be tempted to move ever closer to China in an effort to shield itself from Western, and principally US pressure to reform,” said US Ambassador to Kenya Michael Ranneberger, in a memo dated January 12, 2010, and recently released through the Wikileaks whistle blowing website.
The American diplomat raised questions on Kenya’s relationship with China, observing that China exported more than 30 times its imports to Kenya.
On Thursday, Parliament started discussing a motion seeking to expel the envoy from Nairobi.
In the current financial year of 2010-2011 Kenya is expecting Sh16.79 billion financing from the Chinese government, making it the single largest bilateral donor to the country.
Kenya mainly exports leather, tea, coffee, sisal fibre, scrap metal and horticultural produce to China, however, the country is far from matching what the Chinese are bringing into the country.
Kenya has also stepped up other areas of collaboration with Chinese firms ranging from oil exploration to mining and infrastructure development while opening up its markets to Chinese goods.
Kenya and China are also mulling a huge project to develop a port on the Kenyan coast and a corridor creating a new export route for China’s oil in South Sudan.
President Kibaki has visited Beijing more than twice since coming to power in 2003 besides hosting top Chinese officials, including Prime Minister Wen Jia Bao.
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