Will zero-tariff fix Kenya-China trade imbalance?

The expanded zero-tariff policy became effective in December 2024. [Courtesy] Kenya is increasingly pivoting towards Beijing, seeking to leverage China's expanded zero-tariff trade policy to address a persistent and widening trade imbalance that has long favoured the Asian economic giant. This new trade window, touted by Beijing as a "game changer," comes as Chinese officials actively urge Kenyan and other African producers to seize the opportunity For the longest period, the trade balance between Kenya and China has been heavily skewed in Beijing's favour. Kenyan imports from the Asian giant have surged dramatically over recent years, climbing by more than half to Sh576.1 billion ($4.44 billion) in 2024 from 361.3 billion ($2.78 billion) in 2020. This trend was underscored by a 25 per cent year-on-year increase from Sh458.9 billion ($3.53 billion) in 2023, with machinery and transport equipment forming the bulk of these inbound shipments. While Kenya's exports to China also saw a notable increase, jumping 77.8 per cent to Sh26.3 billion ($202 million) in 2024 from Sh14.7 billion ($113 million) in 2023, this growth was overshadowed by a 9.12 per cent year-on-year drop from the Sh28.9 billion ($222 million) recorded in 2023, further exacerbating the trade deficit. "China's decision to negotiate and sign the China-Africa Economic Partnership for Shared Development, offering zero-tariff treatment on 100 per cent of tariff lines for 53 African countries with which it holds diplomatic ties, marks a historic milestone," stated Shen Shiwei, a China watcher and non-resident researcher at the Institute of African Studies of Zhejiang Normal University, in emailed comments to Financial Standard. "As a leading global player and the first major developing economy to implement such a sweeping initiative, China demonstrates not only its commitment to South-South cooperation but also its role as a catalyst for equitable global development. This move directly addresses the aspirations of the Global South, echoing the urgent need for inclusive growth and economic empowerment." The expanded zero-tariff policy, which became effective in December 2024, was officially announced by Chinese Foreign Affairs Minister Wang Yi during the Ministerial Meeting of Coordinators on the Implementation of the Follow-up Actions of the Forum on China-Africa Cooperation (FOCAC). The policy's rollout coincided with the fourth China-Africa Economic and Trade Expo (CAETE) held in Changsha, Hunan, a southern Chinese city that saw significant participation from Kenya and African officials. Chinese President Xi Jinping framed the move as providing "new impetus" for shared development amidst global "changes and turbulence." Wang Yi reiterated President Xi's vision of fostering an "all-weather China-Africa community with a shared future for the new era," aimed at countering global uncertainties with stability and resilience. Global South The "Changsha Declaration," issued after the high-level talks, emphasised that "the rise and growth of the Global South represents the trend of the times and the future of development," positioning China and Africa as "important members of and staunch forces in the Global South." Wang highlighted China's commitment to deeper collaboration with African countries across green industry, e-commerce, and artificial intelligence, asserting that "openness and cooperation are the right way forward." The forum also implicitly criticized protectionism, a clear reference to tariffs imposed by the United States on China and many African states. The Declaration explicitly stated that "the frequent occurrence of unilateralism, protectionism and economic bullying has created severe difficulties for the economic and social development and the improvement of livelihood in African countries and other developing countries." Chinese commerce officials reported a 15.2 per cent year-on-year increase in imports from African Least Developed Countries (LDCs) under this policy from December to March, reaching $21.42 billion. The Declaration explicitly affirmed China's readiness to "expand the zero-tariff treatment for 100 percent tariff lines to all 53 African countries having diplomatic relations with China...to welcome quality products from Africa to the Chinese market." Despite Beijing's diplomatic overtures and the new policy, Chinese officials have expressed concern about the pace of African uptake. Du Xiaohui, Director-General of the Chinese Foreign Ministry's African Affairs Department, highlighted a noticeable "apathy" from African producers in fully leveraging this unprecedented market access. "We have not seen sufficient applications from African countries to take full advantage of this," Du told reporters in Beijing. "We are working closely with relevant Chinese authorities and our African partners to better facilitate imports." He urged African producers to be proactive, familiarise themselves with Chinese market entry requirements, especially for high-potential products such as cashews and avocados. "This zero-tariff treatment is a golden opportunity. If you get yourself familiar with how to enter the Chinese market, you will win a huge market," Du stated, assuring Beijing's commitment to providing essential "trade facilitation measures" and capacity building. He noted that specialised measures, including inspection and quarantine protocols for specific products, are being worked on in collaboration with African nations. Analysts, however, cautioned that while tariff removal is a significant step, its full impact on Africa's long-term economic transformation requires additional factors. "Consequently, African nations like Kenya will need to boost manufacturing capacity, address non-tariff barriers, and integrate into global value chains to fully capitalise on the initiative, as the trade composition remains skewed towards African raw material exports and Chinese manufactured imports," an analyst noted. President William Ruto, accompanied by his Chinese counterpart Xi Jinping acknowledge grreetings from school children at the Great Hall of the People in Beijing, China. [PCS] Previous zero-tariff policies often saw benefits concentrated in low-value commodities, raising questions about the broader economic impact. Kenya's strategic alignment with China has been particularly pronounced. President William Ruto's five-day state visit to Beijing in early April was a high-stakes diplomatic and economic mission. Economic shifts Ruto was the first African leader to visit Beijing since US tariffs disrupted global commerce, positioning Kenya to potentially leverage the global economic shifts driven by rising protectionism. During his visit, Kenya and China elevated their relationship to a strategic partnership and signed 22 Memoranda of Understanding (MoUs) across infrastructure, trade, health, and security. These agreements included crucial commitments to extend Kenya's Standard Gauge Railway (SGR) beyond Kisumu to Malaba and dual the Nairobi-Malaba road from Limuru, both cornerstones of China's Belt and Road Initiative in East Africa. Discussions also covered direct air links and increased imports of Kenyan produce by China, particularly coffee and avocados. "With China and Africa collectively representing one-third of the world's population, our shared progress is integral to global modernisation. By offering zero-tariff treatment on 100 per cent of tariff lines for 53 African countries with diplomatic ties with China, China ensures that Africa's high-quality agricultural and industrial products translate into tangible economic gains," Shen Shiwei noted. "Success stories like Kenya's flowers, Benin's pineapples, Ethiopia's coffee, and Rwanda's chilli peppers entering Chinese households showcase how zero tariffs unlock market access, stimulate local production, and drive poverty alleviation. This is a strategic investment in Africa's future." This deepening engagement with Beijing comes as Western aid diminishes. China is Kenya's largest bilateral creditor, and Nairobi has been actively pursuing additional Chinese funding to complete key infrastructure projects. Prime Cabinet Secretary and Cabinet Secretary for Foreign and Diaspora Affairs, Musalia Mudavadi, recently led high-level bilateral talks in Changsha, emphasising the urgency of concluding a financial cooperation agreement with China. Du Xiaohui hinted at "positive outcomes" from these discussions, emphasising China's commitment to help African nations resolve debt crises by fostering "self-generated development capacity," rather than merely offering relief. Du also implicitly criticised "certain actions" from nations that "unilaterally increase interest rates" and exacerbate debt difficulties. Kenya's National Treasury recently unveiled a new budget for the fiscal year starting July 1, projecting a total expenditure of Sh4.291.9 trillion, or 22.3 per cent of GDP. The resultant fiscal deficit of Sh923.2 billion (4.8 per cent of GDP) is expected to be financed by a mix of external and domestic borrowing. National Treasury Cabinet Secretary John Mbadi acknowledged the fiscal constraints, including rising public spending demands, debt accumulation, and the challenge of mobilising higher tax revenues. He outlined a fiscal consolidation plan and a continued pursuit of concessional loans, alongside new funding instruments like debt swaps and diaspora bonds. Geopolitically, the zero-tariff pledge further solidifies China's position as a crucial economic partner for Africa. The FOCAC Declaration affirmed a joint commitment to "stabilise this uncertain world with the certainty of the China-Africa relationship, establish a benchmark for sincere friendship and equality in the Global South, and advocate an equal and orderly multipolar world." It also called on the international community to "effectively increase" development assistance to African countries "not unilaterally slash it, a direct response to recent announcements from the United States, Germany, and the United Kingdom citing budgetary constraints and policy reassessments. Regional manufacturing hub Professor Justin Lin, a Chinese economist, advised Kenya to form alliances against US trade policies. "By standing together, countries representing a significant portion of the global economy can create a counterbalance," Lin told Financial Standard. Prof Yao Tang of Peking University suggested Kenya could become a regional manufacturing hub, leveraging rising production costs in China and excess capacity due to US tariffs. "If you want to sell cars in Kenya, then you need to set up some operation in here, right? So that would generate local employment and also technology build up," Tang noted. Executive Director of Governance and Diplomacy Associates Kinyuru Munuhe stated that "Kenya is at a critical juncture. Leveraging its relationship with China can significantly boost its economic prospects and shape its role in the evolving global economic order." Prof Wang Yiwei of Renmin University of China advised African nations to reduce economic reliance on the US and diversify trade partners, emphasizing that "China's modernisation [is] for all of the countries." The ongoing diplomatic engagements, including Mudavadi's recent visit to Changsha, aim to deepen and inject vitality into the six-decade-long China-Kenya bilateral relationship.

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