During the recently held African Summit in Beijing, some influential African leaders called for a balanced trade relationship between China and the region to narrow the trade deficit and address their trade structure.

“One great goal may be narrowing the trade imbalance between China and Africa through increasing imports of agricultural goods and processed minerals,” says Zainab Usman, director of the African Programme at the Carnegie Endowment for International Peace.

The volume of foreign trade — hamstrung by unsustainable debt-financed imports and chronic balance of payments problem — can be boosted by balanced bilateral trade. It can provide impetus to much-needed productivity-led economic growth for exports.

China, the world’s number two economy, is Africa’s largest trading partner, with trade hitting $167.8 billion in the first half of this year, according to Chinese state media. The huge Chinese loans have also funded infrastructure projects with positive outcomes; however, they have also stoked controversy by adding countries with substantial debts.

Pakistan’s trade deficits have led to unsustainable levels of foreign debts, forcing Islamabad to seek constant rollovers

China has vowed to beef up its vast Belt and Road global structure initiative, promising ‘high-quality co-operation’.

More significantly, China and South Africa agreed on Sept 3 to promote balanced trade and discussed boosting two-way investment by their industrial and commercial communities.

The visiting South African President Cyril Ramaphosa had sought with President Xi to narrow South Africa’s trade deficit with Beijing and review its trade structure with China, seeking more sustainable manufacturing and job creation investments.

South Africa is China’s largest trading partner globally, but the value of its imports from China outstripped exports last year. Trade between the two countries soared to $38.8bn in 2023 (South African Presidency).

Pakistan’s trade deficit with China during July-August FY25 marginally shrank to $3.58bn as compared to $3.74bn in the same period of the previous year

Pakistan’s trade with China reflects the same pattern as Beijing’s trade with African countries. To quote a Dawn article, “Pakistan suffers from a ‘crippled national trade’, imports two dollars for every dollar in exports, and relies heavily on remittances, leaving little room for sustainable growth.”

The workers’ remittances during July-August FY25 reached $5.94bn, recording an increase of $1.813bn, or 44pc over the same period of FY24, as per State Bank data.

The country’s exports went up by 14 per cent to $5.05bn, up from $4.43bn, and imports increased by 5.6pc to $8.63bn in 2MFY25 as compared to $8.17bn in 2MFY24, according to provisional Pakistan Bureau of Statistics data. Moreover, Pakistan’s trade deficit with China during July-August FY25 marginally shrank to $3.58bn as compared to $3.74bn in the same period of the previous year.

Over the years, these trade deficits have contributed to unsustainable levels of foreign debts, forcing Islamabad to seek a rollover of Chinese debts. Pakistan also owes Chinese companies billions of dollars.

China accounts for an estimated 20-25pc of Pakistan’s total foreign debt of $130.5bn (as of June 30). According to The Express Tribune, the Global Silk Route Research Alliance (GSRRA) maintains that Pakistan owes significantly less debt to China compared to over three-fourths of its debt owed to mostly Western financial institutions, including the International Monetary Fund, World Bank and Paris Club.

This suggests that “Pakistan is not trapped in CPEC [China-Pakistan Economic Corridor] debt, but rather in Western debt, if at all,” says GSRRA founding Chairman Prof Zamir Ahmed Awan. The same article further states, “These loans will be gradually repaid over 20-30 years, after which the CPEC projects would be handed over to Pakistan.”

The average interest rate for CPEC energy projects was 4pc, lower than the 4.25pc rate by Western institutions like the World Bank, according to Senior Researcher at the Pakistan China Institute Umar Farooq.

No doubt it is the country’s primary responsibility to increase productivity, create enough trade surpluses after meeting domestic demand, diversify production of goods and markets and cater to the changing demands of the international market.

The country should also remain alert to adjust to the challenges of volatile global market trends, including those triggered by geopolitics, Western economic sanctions and surging protectionist measures.

The UN has convened its Summit of the Future this month, deeply concerned that “Global problems are moving faster than the institutions designed to solve them.”

“We cannot create a future fit for our grandchildren with a system built for our grandfathers,” says United Nations Secretary-General Antonio Guterres.

This gathering of global leaders will be “an opportunity to re-boot multilateral collaboration fit for the 21st century”, says Mr Guterres, adding, “We need a system update.”

The world order is “under threat in a way we haven’t seen since the Cold War”, warned CIA Director Bill Burns and UK MI16 Richard Moore in a Sept 7 Financial Times article.

Globalisation has widened the economic disparity between developed and developing countries and within countries worldwide. And the age-old challenges of poverty, hunger, discrimination, misogyny, and racism are taking on new forms, explains Mr Guterres.

It is time for globalisation to take a correction course anchored on the sovereign rights of a nation’s people and with a futurist approach for steering the international economy towards one world economy as visualised by some social scientists.

Published in Dawn, The Business and Finance Weekly, September 16th, 2024