Kenya is a growing African economy which has a bilateral trade relationship with China that goes back decades. Let’s take a closer look at that relationship.
According to IMF statistics, Kenya is Africa’s 6th largest economy by GDP (nominal). The country mainly depends upon agriculture, horticulture, fishing, goods manufacturing, and mining industries for its economic growth and sustenance. As well as on its biggest trading partner, China.
The friendship between Kenya and China runs deeper than simple bilateral trade relations. Both countries have political ties going back over 56 years, from the formal establishment of Kenya as a country.
For many years now, China has been Kenya’s largest trading partner. In just the first half of 2019, the total trade between the two was over 420 million USD, and it’s declined since 2017, where the total trade volume was 3.9 billion USD. But there is a considerable gap between the import and export in this bilateral relationship. In 2017, Kenya spent 3.8 billion USD on its imports from China, while it exported just 10 million USD worth of goods to China; even though it’s the first African country to export avocados to China. As per Globaledge’s data on Kenya’s 2018 trading figures, China is not in the top ten countries that Kenya exports its goods to. Though it is the number one import country for Kenya, followed by India, whose total exports to Kenya are almost half of China’s.
This appears to be a vast imbalance between the two trading countries, but Chinese envoys refute that they are pursuing a trade surplus policy in the country. A claim augmented by the fact that Kenya makes up about 0.1% of China’s total exports. As per the Chinese envoys, the trade imbalance between the countries is the result of markets, industrial structure, and the economic situation of the two countries.
China’s Investment and Benefiting Parties
China has invested heavily in Kenya’s infrastructure. One of its prime examples is Kenya’s Standard Gauge Railway (SGR) created by China. It’s Kenya’s most significant infrastructure improvement project since its formation. China has also issued many interest-free loans, material aids, and started construction aid projects and grant projects in Kenya in the past few years.
This has propagated a belief in the international community that China has started exerting ‘soft power’ in Kenya. A rising Chinese interest in mining and mineral extraction in Kenya is also seen with skepticism.
Despite the non-linearity of this bilateral relationship, both countries are likely to benefit from this partnership. China gets ties to one of Africa’s major growing economies, potential access to Kenya’s main port, and a strong ally in the region. While Kenya receives financial and technical support to improve the country’s underlying infrastructure and industrial strength, that’s something that would have been relatively hard for Kenya to do on its own, without such aid.
The governments of both countries are the major benefiting parties of this relationship. Chinese businesses, primarily industrial and electrical machinery companies, get another growing market. Another benefiting party is Alibaba’s online payment platform Alipay, which is entering Kenya’s online payment market (Previously dominated by a local telecom company Safaricom), through Equity bank – One of Kenya’s largest banks.
Corona Virus and China/Kenya relationship
The recent outbreak of the Coronavirus in China is severely impacting any movement in and out of China. Since there is a lot of movement between China and Kenya, Kenya has become one of the riskiest African countries in this regard. For now, Kenya has suspended all flights to China. And even if WHO’s declaration of Corona outbreak did not intend to impact the global trade market, the trade between Kenya and China might suffer the consequences of such security measures.
Though it’s highly unlikely that the bilateral relationship between Kenya and China might weaken anytime soon, Kenya has started to evolve past its one-friend policy. Kenya has become one of the first African Union countries to seek solo deals with the US. Something that the US might lean towards if only to balance out China’s strong presence in the country.