President Hichilema’s daunting challenge of balancing the lopsided Zambia – China trade partnership.

By Edward Chisanga

There were many policy statements made at the first Zambia – China trade and investment forum this week. One I picked was the President’s statement, at the center of what I often write about, “There was need to promote joint ventures and encourage partnership between Zambia and Chinese enterprises in order to stimulate value addition and industrialization.” In this article, I share with the reader and indeed, government itself, two main challenges ahead of efforts to strengthen trade partnership between Zambia and China, in particular balancing it so that the former begins to export to China manufactured goods.

Challenge 1: Shifting China’s mindset as importer of raw copper and exporter of manufactured goods

Challenge number one is China’s mindset that follows the configuration of rich – developing countries, which China condemns but is practicing on poor countries like ours. In the World Trade Organization (WTO), China, sitting together with developing countries like Zambia is very vocal against rich countries like the US for practicing lopsided trade partnerships of importing raw materials from poor countries while exporting manufactured goods to them. Perhaps China is unaware of the statistic in Figure 1 below that clearly depicts its hypocrisy. China exports more manufactured goods to Zambia while importing more raw copper. We have to be aware that trade is not only about large quantities of absolute figures that China quotes but qualities of Zambia’s exports to China.

While Zambia has diversified export markets to Asia, largely China, it has failed to diversify and add value to exports. Zambia has large quantities but not qualities of copper going to China. As Figure 2 below shows, Zambia’s exports of all products estimated by Unctadstat stood at over $2.5 billion in 2021 although, as we will see the actual reported data by Zambia through COMTRADE shows $1.5 billion. These numbers are normal when reported by two different sources.

The main point is that Zambia is not exporting manufactured goods to China. That should be changed as the President implies so that Zambia begins to export manufactured goods. But the challenge is more that of the Zambian private sector and government although, through foreign direct investment, China can play a role as it does with Viet Nam which has overtaken Africa in exports of manufactured goods. China is aware of how many times poor members of WTO like Zambia have asked rich countries to implement WTO provisions that relate to technology transfer to support value addition but without success. On behalf of my country, I personally tried to work with the US in WTO to implement one provision in favor of least developed countries but failed lamentably. In its trade preference with Zambia, providing more market access, Zambia will do well to negotiate with China foreign direct investment and technology transfer that supports value addition for Zambia. That will not be easy for Zambia to achieve though. Even if agreement is reached on paper, converting it into action may be a tall order.

Challenge 2: Making Zambia’s private sector export to China where it’s not currently exporting.

Challenge number two is that the Zambian private sector does not export to China therefore doing so now will not be easy. China has an existing trade preference for least developed countries like Zambia, running the last ten years or so. If exports of copper to China is not a Zambian private sector role, then Zambia’s private sector is not exporting anything to China. It means it has not taken advantage of the existing trade preference. How it will do that now is a good question to find an answer for. I’m saying this because, as Table 1 below shows, when you see Zambia’s total exports to China of all products of US$ 1.5 billion, and then look at exports of two products HS 740200, raw copper and HS 740311, cathodes which account for 95%, I simply don’t know what our private sector exports to China that is non-traditional or non-copper. Even if cathodes are exported by our private sector, total amounts to only US$ 189 million.

Table 1: Zambia’s exports of all products to China reported by Zambia in US$ millions

Source: COMTRADE

Concluding

Negotiating that China invests more in our country in manufacturing is a good step to take although some Zambians take a different view. I agree with them that we need to create wealth within Zambia by Zambians but there’s nothing wrong in taking a complimentary model of foreign direct and local investment. Sometimes I feel like crying at what I often hear from we black Zambians. We ask government to support local private sector which is true because a strong local private sector is itself an incentive for attracting foreign direct investment. What makes me cry is that while non-black Zambians are dominating steel and other building materials, we black Zambians are dominating politics. How can this build a strong local private sector of black Zambians if we don’t even integrate in available opportunities, (although of course we have limited finance)? But I don’t see those with it investing.

Finally, China has contributed to Viet Nam’s breakthrough in global manufacturing through investment, therefore, the model can be replicated for Zambia. Reported Minh Son and Hung Le in 2019, “Chinese investment in Viet Nam surges. China proved the second biggest investor in Viet Nam, accounting for 15.5% of total registered FDI in the first eleven months of this year, trailing only South Korea’s 19.8%.” Most of this is in the manufacturing sector.

The other challenge is that the source of foreign direct investment is not controlled by governments but by private sector based on its own criteria and choice of destination. I don’t know about China, whether government will simply ask private sector to invest, overlooking business criteria. But for sure, our President must continue to try and overcome these challenges. He is our economic arrowhead that must be supported by all of us.