China’s Diplomacy and Trade in the first half of 2026:
Market access to strategic economic power
Author: Thato Mazwe Madibo
In the first half of 2026, China’s economic foreign policy has indicated that for Beijing,
diplomacy and trade relations are not distinct policy areas. Trade agreements, tariff
concessions, investment promotion, supply chain linkages, internationalisation of currency and
technology cooperation as well as political diplomacy are now used as components of one
comprehensive economic approach. It is significant with regard to Africa because China is
doing both at the same time, one, that it is opening access to its market and two, it is reaching
out for deeper connections in the areas of critical minerals, manufacturing, infrastructure and
industrial supply chains.
Thus the first half of 2026 gives a clear sign of the direction in which Chinese diplomacy will
be moving in the second half; towards a closer relationship with the Global South, closer
economic ties with its neighbours in Asia, competition with Europe and prevention of the
disruption of strategic supply chains.
1. China-Africa Relations: Moving From Political Solidarity to
Market Access
China has decided to extend the zero-tariff arrangements to all African states it is diplomatically
related to, which is the most crucial step that has been taken for Africa. China has one of the
most important trade-policy measures in China-Africa economic relations: implementing zero-
tariff treatment for products from the 53 African countries with which it has diplomatic ties
from 1 May 2026. China says the action is part of the follow-up to the promises made at the
summit of the Forum on China-Africa Cooperation (FOCAC) in 2024 and aimed at boosting
access of African exporters to the Chinese market. (Chinese Foreign Ministry)
This policy is not something that should be taken lightly but, its economic impact will greatly
rely on the productive capacity of Africa. Unlimited access to markets by itself does not lead
to export development. But constraints pertaining to production volumes, logistics, standards,
financing, processing capacity and the capacity for consistent supply to large markets still limit
African economies. Thus the policy is an opportunity not an outcome. Tariff preferences are
likely to be most effective in countries that can manage to sustain competitive exports instead
of merely import volumes and expand their shipments of raw materials.
It is an important consideration especially for South Africa. In February, the city of Pretoria
and the city of Beijing signed the Framework Agreement on Economic Partnership for Shared
Prosperity, laying the groundwork for further economic cooperation in trade, investment, new
energy and multilateral affairs. The agreement was meant to facilitate the South Africans’
access to the Chinese market and establish a base on which their bilateral economic ties can be
structured. (Government of South Africa)
By June, it wasn’t a political promise any longer. Memoranda of understanding between South
Africa and China were signed related to regulatory compliance and standards, with the
objective of making the ‘zero tariff’ possible. This is of economic interest as standards and
regulatory provisions may constitute noteworthy non-tariff barriers even if customs duties are
not imposed. (DTIC)
2. “Industrialisation is the true test of South Africa-China relations
In South Africa, it is not about whether China is opening its market, but the central economic
question. Whether South Africa will be able to produce competitive value added goods to
utilize that opportunity.
That’s where things get a little more complicated with the relationship. The substantial amounts
of minerals and agriculture products already exported to China and the import of manufactured
products, machinery, electronics and other industrial products indicates that South Africa is
already a major trading partner of China. Ideally, a successful economic partnership will be
structured to minimise structural asymmetry through growing South African involvement in
higher value aspects of the partnership.
The South African government has specifically flagged sectors where the Chinese side should
be investing more and doing industrial co-operation, including manufacturing, automotive
production, batteries, pharmaceuticals, medical devices, rail manufacturing, steel, tyres and the
digital economy. The 2025–2029 South Africa-China Trade and Investment Package was
precisely formulated with these goals in mind. (Government of South Africa)
This direction was given further momentum during his visit in June by Deputy President Paul
Mashatile. In his visit to China, South Africa has pitched itself as a portal to the wider African
market, leveraging on the investment opportunity that it has to offer because of its participation
in the African Continental Free Trade area. (Government of South Africa)
At stake is a quite considerable strategic opportunity. If South Africa can provide a reliable
electrical supply, ports, railway networks, industrial facilities and regulatory certainty and
access to African markets, it could be an appealing option for Chinese companies considering
making investment commitments in other countries. This will, however, necessitate
negotiations for productive investment from the part of South Africa and not only for more
imports.
3. China and the Global South – A More Comprehensive
Diplomatic Strategy
The China Africa strategy is part of a more extensive movement of strengthening ties of the
Global South. The emphasis in diplomacy in 2026 has shifted increasingly from traditional
political diplomacy to development and infrastructure, trade and technology.
Wang Yi’s trip to Ethiopia, Somalia, Tanzania and Lesotho in January started off the year of
China’s traditional diplomatic activities concerning African affairs. 2026 is the Year of People-
to-People Exchanges between China and Africa, as part of the overall process of implementing
the FOCAC’s commitments 2024. (Focac)
This is important because it is diplomacy that establishes the political platform out of which
economic relationships can form. It’s not just about selling China’s products to developing
countries. It increasingly wants to develop long-term partnerships delivered in infrastructure,
finance, technology, education, industrial capacities/supply chains.
There is thus a new model, not only one large infrastructure project, but a network of economic
ecosystems.
4. China and ASEAN and contends that this has become its key
economic alliance
Until now, China-ASEAN relations constitute one of the most strategic aspects of China
external economic policy. China has been and will remain the top trading partner of ASEAN
for the next six consecutive years as bilateral trade surpasses US$1 trillion for 2025. In 2026,
in the first half of the year, Beijing further consolidated this partnership by implementing the
Protocol for the Upgrade of the ASEAN-China Free Trade Area 3.0 (FTA 3.0). (Chinese
Foreign Ministry)
This relationship is one that has implications beyond just tariff cuts. ASEAN is deeply
integrated in Asian manufacturing value chains, such as electronics, semiconductors,
automotive components and increasingly advanced manufacturing. China thus has a clear
interest in sustaining good business relations with the SE Asian economies, despite the
geopolitic tensions in the Indo Pacific region.
Beijing sees in ASEAN diversified regional markets and partners in the value chain. China is
an access to a vast market for consumers and industry for the ASEAN countries. This
connection is so not just politically aligned, but also strategically interdependent.
That factor carries weight to the understanding of China’s diplomacy. Beijing shouldn’t
necessarily expect its trading partners to endorse its political outlook. The mere fact of a certain
level of economic interdependence can itself be a stabilising factor.
5. Europe: Competition without economical separation
However, the picture is far from rosy when it comes to China and Europe. The level of trade
tension doesn’t seem to have receded much, with tensions shifting from export tax preferences
to industrial subsidies, electric vehicles, export controls, market access, and China’s massive
trade surplus that continues to plague the economy.
However, the first half of 2026 was also a testament to the fact that Beijing and Brussels have
established an institutional framework for economic cooperation. On 29 June, China and the
European Union held the first meeting of their new Trade and Investment Consultations
mechanism. Four work streams identified: trade and investment balancing, export controls, IP
rights and WTO reform. The two sides agreed to further consultations at the ministerial level
in the fall of 2026. (MOFCOM English)
This suggests that China is looking to control competition instead of facing a full-scale
economic decoupling. Both sides see Europe as too essential a market, technology partner and
source of investment to realize an economic split as painless.
Meanwhile, in Europe, the governments are increasing their awareness of Chinese supply
chains and Chinese industrial competitiveness. Thus, this second period, in 2026, will most
likely be one characterised by further negotiation and an increasing degree of strategic
competition.
6. Central and eastern Europe: investment diplomacy
The case of China’s economic ties with Central and Eastern Europe is another example of the
use of investment as a means to strengthen diplomatic ties.
In the first half of 2026, the trade volume between China and the countries of CEE was 580.1
billion yuan (US$85.6 billion), increasing 11% YOY. Chinese capital investment in the region,
ranging from vehicle manufacturing to battery production is increasingly helping to fuel the
bilateral trade. (China.org.cn)
This may be of strategic importance since Chinese companies are increasingly trying to build
production capacity closer to their foreign markets. Investment can thus be a means for access
to markets even in times of new constraints for traditional trade.
There’s a takeaway for African policy makers here: when negotiating investments, one should
look not only at investment inflows to Africa but also at the productive capacity they generate.
In this chapter, the editors provide an overview of the Renminbi and discuss the financial
aspects of Chinese diplomacy.
7. The Renminbi for the Diplomacy of Foreign Trade
As the scale of China’s trade with Africa continues to expand, measures for yuan settlements
are being undertaken more often. An arising model comes from Angola. Banco de Fomento
Angola is also set to be a member of China’s Cross-Border Interbank Payment System (CIPS)
and Angola has also upgraded the renminbi in its foreign-exchange reserve (forecast) scheme.
In fact, South Africa’s Standard Bank is already studded with links to CIPS and has been
granted clearance to clear yuan across the African continent, in partnership with ICBC.
(Reuters)
That isn’t to say that the renminbi is destined to supplant the US dollar as the international
currency of choice. That’s a strong statement to make. The dollar remains competitive in the
international financial markets and in terms of reserve holdings, liquidity and capital inflows.
The difference is on the availability of alternatives.
Direct yuan settlement may be a way for African economies that trade a significant amount
with China to not only lower transaction costs but also offer an additional option to manage
international payments. It may help, over time, to promote a more diversified international
monetary system.
8. Technology Is Finding Its Way into China’s Diplomacy
Technological co-operation also marks a growth in China’s ambassadorial activities.
Significantly is the fact that what can be called broadly China’s “AI diplomacy” has emerged.
In a bid to establish itself as a public-goods provider for the developing world in AI models,
digital infrastructure, and technical training, Beijing has created a shuffle of institutions and
policy plans. Beijing’s shuffle of institutions and policy plans aims to make Chinese modes for
AI, digital infrastructure, and technical training more likely to serve the developing world as
public goods. As early as July, President Xi Jinping encouraged China to expand international
cooperation on AI, such as building international application cooperation centres and the World
AI Cooperation Organisation. (Financial Times)
This poses a question and an opportunity for Africa.
Lower costs in accessing AI infrastructure, digital platforms and technical training could help
to accelerate productivity in African economies. African governments, however, will have to
take into consideration data governance challenges, technological reliance, cybersecurity, IP
and domestic capability.
The goal should not be to achieve Chinese technological dependency instead of technological
dependency on the west. This should aim at enhancing Africa’s technical voice through
diversifying partnerships, and strengthening domestic capabilities.
9. What to anticipate in the 2nd half of 2026?
2026 will most probably be a year of implementation, not of just proclaiming new diplomatic
efforts.
The first question that will arise for Africa is whether China’s offer of zero-duty for imports is
likely to lead to improved African exports. Tariff liberalisation very likely will take a while to
put in place, so careful consideration of the early evidence is required.
The final part of the China economic partnership pacts, and their implementation in South
Africa, will be a priority. SA trade plans explicitly cite an Early Harvest Agreement as a target
for 2026 in the framework of China Economic Partnership for Shared Prosperity. (South
Africa’s Parliament)
It is important that the relationship should develop towards more and more industrial
cooperation. Driving the automotive industry, critical minerals, renewable energy, batteries,
agriculture, pharmaceuticals and digital technologies are expected to remain significant sectors.
In addition, the process of implementing the ACFTA 3.0 framework is expected to further boost
China-ASEAN ties. China already trades more than US$1 trillion with ASEAN each year and
incremental gains in market integration could make a significant difference.
But for Europe, it’s more complicated. The negotiations will probably continue, however
structural issues like trade tensions in the area of industrial policy, electric vehicles and export
controls and market access will stay in place.
10. Forecast: China’s Economic Diplomacy Dec-2026
My even lower bound estimate is that China will end 2026 with a wider and diversified external
economic network than it started with. Asia is Beijing’s top priority and there’s been a pivot
towards the Global South, ASEAN and emerging markets, but they’ll never give up on their
ties to Europe and other major developed markets.
The shift from political partnership to preferential market access is the most significant thing
for Africa. China’s zero-tariff policy offers a key opportunity to African exporters, but who will
benefit at the end of the day will be decided by productive ability. Countries with the ability to
engage in the processing of minerals, to develop exports of agricultural products that meet
Chinese standards and to manufacture products of their own, will be able to retain a significant
portion of value than countries that remain as privileged exporters of scarce raw materials.
If South Africa can leverage its mineral resources, industrial potential and AfCFTA market
access with the Chinese investment pulse, then it’s in a very strong position. The country should
therefore not only regard China as a market to export to, but possibly as a potential industrial
partner. Strategic goal should be toward co-production, technology transfer, local supply chains
and African market integration.
Greater focus on financial connectivity and yuan settlement, digital infrastructure and
cooperation on artificial intelligence, are also likely to prevail in the second half of this year.
These will slowly be the trend towards more multidimensional economic relations with China.
The basic danger is that African countries are in effect becoming more a part of the Chinese
economy without growing enough to do so. Absence of industrial development is not economic
transformation – it’s trade dependence.
There is, however, a huge opportunity.
But at the very time that international trade is fragmenting, China is providing African
economies with enhanced access to the second-largest in the world, its own. The key for
African governments is whether they are able to translate that access into industrialisation.
11. Conclusion: Trading with China to Building with China
The first half of 2026 indicates that Chinese diplomacy is witnessing new developments with
a stronger inter-mesh between trade, investment, technology, finance and political ties.
China’s diplomatic presence itself is not the most significant aspect when it comes to Africa.
It’s the opening up of China for zero-tariff trade and potential for greater in-rinse investment
and industrial cooperation.
As for south Africa, that is even more precise. The country is endowed with mineral resources,
an industrial economy, financial institutions and strategic location, which make it a huge
potential channel for Chinese investments into Africa. However, this will happen as a result of
a conscious effort to move away from commodity export to beneficiation, manufacturing,
technology and regional value chains.
The gauge for China’s African diplomacy should thus not just be the number of agreements
signed as “end of 2026” approaches.
Whether those agreements lead to increased African exports, increased industrial capacity,
higher value jobs, technology transfer and strengthened domestic productive capabilities,
should be it.
It is obvious that China is considering its stance in the next economic order of the world.
This is what Africa has to do!
