Sourcing in China and Hong Kong

CHINA'S role as an industrial resource for Africa started with supplying low-priced goods such as cups, forks, and umbrellas, addressing the continent’s need for cheap goods in large quantities. As China’s competitiveness in the manufacturing industry improved and Africa’s economic development led to more sophisticated needs, Africa itself  has had to go to China to source what it needs.

The main reason for China’s dominance as a sourcing destination is its low costs. Depending on the product and industry, one can book cost savings averaging 30% by procuring in China. 1

China’s infrastructure also lends it a distinct advantage over other developing nations. The country, ranked 27th on the World Bank’s Logistical Performance Index, has a vast and modern road and railway network. It has six of the world’s busiest ports as well as 500 airports to link Chinese products with their end-users overseas.

This transformation into a manufacturing powerhouse in the 1990s fuelled China’s impressive growth in its trade with Africa. China’s “going out policy” sought not only to find new markets for its exports but also to source large quantities of raw materials needed by its rapidly expanding economy.2 Data from the Chinese Ministry of Commerce showed that China-Africa two-way trade volume was only $12.14 million in 1950 but rose to $100 million in 1960 and exceeded $1 billion in 1980. It sustained the growth momentum after reaching the $10 billion mark in 2000. In 2008, China-Africa bilateral trade volume exceeded $100 billion, of which $50.8 billion are China’s exports to Africa and $56 billion are imports from Africa. The trade volume dropped to $91.07 billion in 2009 as a result of the global financial crisis but bounced back soon after. From January to November 2010, China-Africa trade volume reached $114.81 billion.

With the expansion of the scale of trade, more products entered each other’s markets. In the 1980s and 1990s, Africa bought mainly light industrial products, food, chemical products, native produce, and animal byproducts from China. Since 2000, the export of machinery, automobiles, and electronic items has been dramatically increasing. The Chinese Ministry of Commerce said that machinery and electronic products accounts for more than half of Africa’s imports from China.

The rising competitiveness and innovation of Chinese exporters of manufactured goods, particularly in the construction machinery sector, for example, was primarily driven by the country’s infrastructure buildup over the past 15 to 20 years, creating significant economies of scale and scope for most of the country’s manufacturing sub-indices.3 The same effect has benefited the producers of steel commodities and structural steel, construction materials, trucks, barges, electrical equipment, and power generation equipment. The infrastructure buildup and procurement demand, initially fuelled by foreign-invested companies and with some assistance from government procurement policies, government-approved projects, as well as the availability and low cost of land and capital, have generated a highly competitive and increasingly sophisticated plethora of local producers that are now dominating the CCheap Nike Air Max