Kenya-China Trade in Manufactured Goods: A Competitive or Complementary Relationship?

Abstract

Trade between Kenya and China has increased in recent years, with a significant increase in imports from China. This study's objectives were to examine the nature of trade between Kenya and China in manufactured goods, analyze the Revealed Comparative Advantage (R.C.A.) and make recommendations for improving trade. This study was based on the Comparative Advantage Theory and used data from the United Nations Commodity Trade Statistics Database (U.N. Comtrade) from 1984 to 2015, as this period had complete data. The results suggest that the nature of trade in manufactured goods between Kenya and China is characterized by high imports from China and very low exports from Kenya-a large proportion of Kenya's manufactured exports end up in countries with which it has a clear trade framework. Moreover, Kenya lacks a comparative advantage for manufactured goods, while China has a high comparative advantage; therefore, Chinese exports complement Kenya's import needs. The research identified the lack of a comprehensive trade policy and strict rules of origin as serious challenges to trade between Kenya and China. In addition, Kenya's trade orientation in the manufacturing sector has been reduced by inadequate investment, limited value addition, and high labor costs. Resolving these obstacles is vital to overcoming trade imbalance and boosting Kenya's competitiveness, as the potential for future growth in trade in manufactured goods from Kenya to China is weak, based on existing economic specialization. Kenya should focus on a comprehensive trade policy with China, support more FDI in manufacturing, innovation, and technology, improve labor productivity and infrastructure, enhance its global value chains, and create new comparative advantages among others. This will improve the competitiveness of its products and increase trade orientation on the Chinese market and globally. The study concludes that Kenya-China trade in manufactured goods is complementary. This conclusion can only be applied in genera since the study used aggregate data. The findings confirm the Compara-How to cite this paper: Githaiga, N. M.

Unlocking Trade Potential: A Stochastic Frontier Gravity Model Analysis of India-Africa Information and Communication Technology (ICT) Goods Trade

“…Some studies suggest that the lower cost might reflect lower quality. However, from a consumer's perspective, a lower-priced product is highly attractive, even if that means the quality is not top-tier (Githaiga, 2021). This trade-off between cost and quality might significantly influence African countries' pivot towards China.…”

Regional Factors Influencing Bilateral Trade Between Kenya and South Africa

“…According to Moyi and Kimuyu (1999), this is mainly influenced by the rates of wages paid to the workforce, the level of productivity of the workforce, and the currency exchange rate within the international market at the time. Arguably, for Kenya, the problems of lack of well-equipped manpower, corruption, poor infrastructure, less investment in science and research, and also a poor business environment have deviated the focus on production from extensive manufacturing of commodities to the adoption of primary product production (Githaiga, 2021). This, however, is an area that the government, through policies and funding, is looking into by promoting technical skills, which are key for the manufacturing sector.…”

“…Nevertheless, the Kenyan GDP, as postulated by Githaiga (2021), is highly influenced by the massive control the country has over the agricultural and services sectors within the region. In fact, the country's foreign trade is a product of the high exports of horticultural products like fruits and flowers, agricultural products like coffee and tea, and the service industry like tourism.…”

“…From Table 5, it was observed that 72.9% (219) of the respondents affirmed that Kenya is actively engaged in addressing the key regional factors influencing bilateral trade while 27.1% (81) declined that Kenya was not actively engaged in addressing the key regional factors influencing bilateral trade. Kenya has a problem of lack of well-equipped manpower, corruption, poor infrastructure, less investment in science and research, and also a poor business environment, which has deviated the focus on production from extensive manufacturing of commodities to the adoption of primary production (Githaiga, 2021). Kenya encourages foreign direct investment to improve innovation with the aim of increasing production capacity to be able to satisfy the consumption needs of its growing population and create a trade surplus.…”