Chinese Manufacturers Eye Africa to Switch Production

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China’s economy is moving to higher-value-added production, and worker’s wages are rising rather rapidly, this drives many low-wage producers, especially those in textile and garment sector to switch production to countries and regions with cheaper labor, for example Africa.

Of course, cheap labor does not have the final say. Countries and regions must also have enough infrastructure and a good business environment. In African countries, industrial parks offer to play a key role in creating workable manufacturing platforms.

Sub-Saharan Africa has world’s largest ratio of young people, about 43 percent of its population are under the age of 15, while in the United States, China and Europe, this ratio of young is less than 25 percent. Africa has a population of about 200 million who are between 15 to 24, according to the Kaiser Family Foundation, a US nonprofit organization.

African countries have been stayed low in the World’s Bank’s ranking list in terms of ease of conducting business. The index includes measures for activities such as registering property, obtaining credit, accessing electricity and gaining construction permits.

africa manufacturer - Chinese Manufacturers Eye Africa to Switch Production

Photo/China Daily

The good news is, many of these countries are making great efforts to move up. To take Rwanda for example, the country has realized the biggest number of business reforms in the whole world in the last 15 years, according to the World Bank.

In 2017, 36 of the total 48 economies in Sub-Saharan Africa implemented a record 83 business reforms that aimed to facilitate ease of doing business. This accounts for about 31 percent of business reforms the world implemented last year, and is the biggest number of reforms registered in any bloc, as Doing Business of the World Bank shows.

At present, Africa’s economy has agriculture and mining as its base, while the share of manufacturing sector in its GDP is declining. African economies have basically been aware of the significance of economic restructuring, but its no easy job to steer the economy for agriculture to industry.

Chinese companies show up there to invest and establish industrial parks, in order to improve business environment and infrastructure. This gradually help Africa accumulate capital and upgrade its industry, and improve industries’ global competitiveness.

Read Also: China’s E-Commerce Could Help Africa Industrialize

Textile and garment manufacturing is a good example of the type of industry that has honed a comparative advantage in Africa as the industry relies on large workforce, with relatively low requirement for skills.

For example, Lida (Ethiopia) Textile makes jeans that are sold in local markets. It was put into operation in September 2017 and began to make profits in November, according to Liu Jianxun, its director. Liu said local production can reduce Ethiopian imports, but it still need to import from China many of the raw materials, in particular cotton. And when it comes to this kind of futures, it’s better to seek a cross-border e-commerce platform for long-term and stable imports. China’s burgeoning e-commerce industry has fostered a batch of platforms, among them JUMORE, Made-in-China, all facilitating the trade processes.

By the end of 2017, Chinese companies had created about 210,000 jobs and contributed more than $2,2 of taxes for 24 African countries that are involved in the Belt and Road Initiative. It is expected that, with the further advancement of the Initiative, Chinese manufacturers will conduct business on a larger scale in Africa.

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