Regional trade
China-Africa economic relations: the case of Uganda
Chinese trade, investment and aid in Uganda: trends, costs and benefits
Authors:
Publisher:
African Economic Research Consortium , 2008
China's economic influence in Africa has been increasing over the years. The China-Africa summit held in November 2006 resulted in an estimated $ 1.9 billion in trade and investment deals, and pledges to double Chinese aid to Africa by 2009. But how do Africans perceive Sino-Chinese economic relations? To initiate the debate, the African Economic Research Consortium has recently published a case study of the impact of economic relations between China and Uganda.
Bilateral relations between China and Uganda began in the early 1960s. In the decades that followed, economic and trade cooperation between the two countries diversified considerably, resulting in a trade volume of close to $100 million in 2005. China was also ranked among the top ten countries that had invested in Uganda from 1991 to 2000.
Specifically:
- China's major exports to Uganda have been in mechanical and electrical appliances, textiles, garments, pharmaceuticals, porcelain and footwear
- China's major imports from Uganda have been in tea, coffee, spices and plastics
- Chinese’ investment in Uganda has been in the manufacturing sector, electricity gas and water and community, social and personal services, in descending order
China has also substantially increased is aid commitments to Uganda over the years, which it has provided in the form of technical assistance, with an emphasis on training in Chinese institutions, grants, interest-free loans, preferential loans that have an interest subsidy and debt relief.
Uganda has no doubt benefited from its ties with China so far. Owing to market distortions, however, and the high costs of shipping merchandise to China, Ugandan traders have found it cheaper to import goods from China than produce them locally. Also, most of the Chinese firms that have invested in Uganda have been privately owned rather than joint ventures between China and Uganda. Both these trends have had a dampening effect on employment generation and economic performance in Uganda.
The report concludes that while it is important to further strengthen trade and investment between the two countries in the days ahead, Uganda can gain more from this relationship if it also:
- further strengthens intra-regional trade
- insists on greater transparency in Chinese aid flows, including in loans
- ensures that further development assistance is aligned with national priorities as formulated in the Poverty Eradication Action Plan (PEAP) – Uganda’s PRSP
