What you need to know:
Several concerns have been raised about China’s role as the leading exporter of counterfeit goods in Kenya. The Anti-Counterfeit Authority (ACA) has pointed to China’s involvement in fast-moving goods like phones, sound equipment, cables, clothing, and automobile spare parts.
The recent suspension of a Chinese steel maker’s permit by the Kenya Bureau of Standards (KEBS) for supplying low-quality steel has sparked a controversy and highlighted the concerns surrounding `affordable’ Chinese steel being dumped into other countries.
The suspension followed complaints about the poor quality of ribbed bars.Ribbed bars are used in concrete reinforcement, and their poor quality poses significant risks to construction safety and public welfare. This is the strictest action taken by the Kenyan board against any Chinese firm in recent times.
The company, Rongtai, has also had its operations suspended until it can demonstrate full compliance with the required standards. While China may excel in selling cheap steel products, their foray into politics often leaves much to be desired.
Kenya’s action against the Chinese steel maker came at a time when Japan and South Korea have also adopted anti-dumping measures against Chinese steel products. The US has levied higher tariffs on Chinese steel last year, adding to South American countries, which also hiked taxes on the same.
In Vietnam too, cheap Chinese steel has become a real concern for domestic steel enterprises. The latest report by Shinhan Securities Vietnam (SSV) stated that the influx of Chinese steel into Vietnam has an adverse impact on domestic steel enterprises.
Business analysts have noted that China is mainly exporting its steel to nearby developing economies that still need to build infrastructure at large scale. Nations in Southeast Asia, South Asia, and the Middle East have seen the biggest increase in imports this year, many of which are also partners in Beijing’s ‘Belt and Road Initiative’.
According to BNN Bloomberg, even these countries are now raising trade barriers in response. This spells trouble for Chinese steelmakers, as it indicates how saturated the market has become. The situation will become even more costly for mills if they are forced to ship their products further afield.
Chinese steel has a history of stoking trade tensions. The latest news reports suggest that China’s booming steel exports may not last long. According to data from China’s Commerce Ministry, importing countries have launched 25 anti-dumping investigations since 2016. If past trends hold, expect sales to drop sharply.
Why does China export cheap steel?
Analysts explain that exports have been crucial in keeping Chinese mills afloat, as there is insufficient domestic demand to sustain production levels of one billion tons a year. However, the flood of cheap Chinese steel is dragging down the entire market. Rival companies from Europe and Japan have called for tougher measures to stem this tide.
Backlash against China: Phones, Automobile Spare Parts, and Counterfeits
Several concerns have been raised about China’s role as the leading exporter of counterfeit goods in Kenya. The Anti-Counterfeit Authority (ACA) has pointed to China’s involvement in fast-moving goods like phones, sound equipment, cables, clothing, and automobile spare parts.
The influx of counterfeit and discounted goods from China has left Kenyan traders in a difficult position. Traders have filed complaints against China for financial bullying, urging the government to take action against Chinese traders for their counterfeit products.
There is growing anti-China sentiment among traders, who fear losing business to Chinese goods. Local manufacturers and traders have long accused China of dumping cheap or counterfeit goods in Kenya, which they consider an insult to their industry. China is Kenya’s largest multilateral lender, with loans over Ksh1 trillion of Kenya’s Ksh10 trillion debt. This has fuelled discontent among traders over China’s imbalanced policies.
Ironically, China is facing backlash for its trade practices not only in Kenya but also in other countries. Reports show that China has been flooding markets with cheap goods, including electric vehicles, textiles, and steel, from Indonesia to Brazil, threatening domestic industries.
The backlash to China’s trade practices is growing by the day. Brazil has imposed a 35% tariff on Chinese fibre optic cables and 25% on steel and iron imports, while Indonesia has set a 200% tariff on Chinese textile imports.
Thailand has established a special government committee to clamp down on Chinese imports after the closure of hundreds of domestic factories. Similarly, Peru and Mexico are also imposing anti-dumping measures on Chinese steel, according to recent reports.
China’s attempts to export steel, which is 10 to 20 per cent cheaper than products from other competitors, is a blatant attempt to displace local producers, especially in developing countries where the industry is less protected from price dumping. However, it is essential for countries to recognize China’s strategy for what it is: a cynical attempt to pose risks to construction safety and public welfare and manipulate foreign markets.