Kenya top gainer in China shift to consumption

Money Markets

A worker packages flowers in Naivasha. Agricultural exports to China expected to boost Kenya’s economy. PHOTO | SULEIMAN MBATIAH 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• World Bank forecasts tourism and agricultural exports to Asian giant to lift Kenya's economic growth.

Kenya is poised to be among the biggest beneficiaries in sub-Saharan Africa of China’s change to a more consumer-driven economy, the World Bank has said.

The Bretton Woods’ institution estimates that Kenya’s economy will grow faster from increased exports to the Chinese economy to feed its new consumption including tourism and agricultural products.

“The countries in sub-Saharan Africa that are expected to benefit the most from China’s rebalancing are Kenya, Madagascar, and Nigeria. The higher than average gains result from the prevalence of products more linked to China’s consumption demand as a share of their exports,” said World Bank in a new report.

Consumption edged out investment as the main engine of China’s economy last year in what has been called a rebalancing. This is expected to see China join the league of America and the United Kingdom as key export markets.

The rebalancing is expected to result in higher demand for imports biased towards services, driving up prices in the service industry, said the World Bank.

Trade relations between Kenya and China have for long been skewed in favour of the Asian country. Kenya imported goods made in China worth Sh248 billion last year compared to exports of Sh6.5 billion.

Chinese companies have also taken the bulk of local infrastructure projects, including the standard gauge railway.

Nairobi increased cash allocated to marketing itself as a tourist destination to the Asian country two years ago in efforts to cut reliance on the traditional western market, which were perceived to be quick to issue travel advisories based on security concerns arising from terror attacks.

READ: Kenya bets on Chinese to lift struggling tourism sector

The marketing strategy is yet to bear fruit with the number of tourists from the Asian country dropping over the past two years to 92 million from a high of 114 million in 2012.

The World Bank report gives new impetus to the government’s efforts to exporting to the country, whose population of more than 1.3 billion people creates a huge market.

Economist X N Iraki said the Ministry of Industrialisation needed to conduct a survey to determine the needs of the Chinese people so as to take advantage of the opportunities.

“In tourism let everyone market the country including the media in its reporting. If we just get 10 million Chinese tourists, that would be sufficient. And it need not be expensive because they are very prudent people,” said Dr Iraki.

The World Bank does not expect Kenya to be hurt by a slowdown of the Chinese economy. China has been growing at an average 10 per cent for the last ten years before it dropped to 7.5 per cent last year.

The rapid economic growth has bred a new middle class in the Asian country eager to consume imported goods and services.