China signs trade pact with EA in race for resources

China has signed a trade and investment deal with east Africa, stepping up the scramble for the region’s resources following a similar pact with the US three years ago.

The Trade and Investment Framework Agreement (Tifa) will focus on the promotion of commodity trade, tourism, investment, infrastructure development and human resource training between the world’s second largest economy and the East Africa Community (EAC).

“This platform will be good for our business community. We need to promote infrastructure and this is of significance to our future cooperation,” Jiang Yaoping, China’s vice-minister for Commerce said in Arusha after signing the deal with EAC secretary-general, Richard Sezibera on Thursday.

“We should work together to identify projects, especially those that need financing, as quickly as possible,” the Chinese minister said.
China is among the fastest growing global economies competing for trade and investment pacts under the expansive East Africa common market.

China’s main rival global economy, the US, signed a similar TIFA with the EAC in July 2008 and has used the agreement over the years to extend its influence in the region.

The value of India’s exports to Kenya rose to Sh97.6 billion or 18.7 per cent of Kenya’s total imports in the first eight months of the year compared to China’s Sh87.2 billion or 16.7 per cent of imports, making it more urgent for Beijing to improve its competitive position in the resource rich region.

The newly signed TIFA with the EAC is expected to bolster the Asian nation’s growing partnership with Africa that is driven by its thirst to find resources to support its vibrant economic and industrial growth.

Analysts said Africa has proved a perfect match for China because consumers in poor countries prefer the more affordable goods and equipment from the Asian nation.
“The challenge before the business actors in China and the EAC region is to develop more robust partnerships to spur trading relationships through investments in the broad range of sectors especially in the infrastructure but also in agricultural production and processing of agricultural commodities which are very key,” Hafsa Mossi Mossi, the chairperson of the EAC council of ministers said.

China is particularly active in the construction and infrastructure development sector in East Africa and has since branched into other key economic drivers such as manufacturing.

EAC secretary-general Richard Sezibera said there is huge potential for investment in the region’s infrastructure and tourism sectors.
“EAC requires approximately $80 billion in infrastructural investments for the period up to 2018.

This investment for sure will not be raised within this region and we are, therefore, extending a hand of friendship to Chinese investors to work with us and take advantage of the huge potential for investment,” he said.

Several Chinese manufacturers are already setting up local production plants in several east Africa countries including Kenya, shifting from the previous strategy in which they supplied the domestic consumer market with goods imported from their home soil.

Kenya has particularly stood out in the region for its vibrant trade and investment ties with China despite concerns over the huge gap in balance of trade with the Asian nation.

The Chinese government has in the past few years taken to offering financial subsidies to Chinese companies to facilitate their imports from Kenya to improve the balance of trade heavily tilted in favour of the Asian economic giant.

The subsidies covered products such as coffee, tea and flowers, along with other commodities.
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