| Trade between China and African countries has dramatically increased in recent years, at anunprecedented rate. However, there is a big debate in the literature on China-Africa relations betweenscholars who see China as a neo-colonialist that reinforces a classic north-south relationship ofexploitation, and those who see China as a different development partner, emphasizing South-Southcooperation and mutual benefit. Therefore, such foggy picture and hot debate on the China-Africa tradedeterminants and potential impacts, along with such few number of studies to this date that haveexamined the this trade relations and its potential impacts on African economies, creating literature gapin, together have attracted the author’s interest to conduct the present study and addressing these issues.Specifically, the aim of this study was to fill the gap in the literature by investigating China-Africatrade determinants in order to develop better understanding of its dynamics, potential impacts on Africa,and how to make best use of the positive spillover effects that Chinese involvement is having on thecontinent. Of the many possibilities, we have decided to focus on the trade as potential channel ofimpact. The research major questions included; how the emerging pattern of trade, investments,development cooperation in China-Africa relations looks like? What are the determinants of tradebetween China and Africa? What is the likely impact of China’s further partnership with Africa? And,how can African countries develop a strategy that response to that impact and help Africa’s to benefitfrom this emerging relationship?.The major empirical results of the comparative advantage analysis suggest that Chinese agriculture isnot competitive, China has reduced import barriers significantly since joining the WTO, and China hasentered into trade agreements providing for zero tariffs with many African countries. Thus there shouldbe considerable potential for African economies to benefit from exporting agricultural products toChina. However, agricultural exports to China are only about3%of Africa’s total agricultural exports,and these exports are concentrated in a few products from a limited number of countries. With regard tooil, Congo has the highest comparative advantage, followed by Chad and Angola. The correlationbetween countries’ revealed comparative advantage and the intensity of trade with China is positiveand fairly high (0.26); it is the most significant of the three sector groups. China’s desire to obtainsecure energy supplies is well known, and it is likely that Chinese demand for oil will continue to rise,while Africa has significant reserves. This amounts to a relationship of complementarity. Africaneconomies’ highest comparative advantage in manufactures and processed goods is in metals(Mozambique), tobacco (Benin), refined oil (Algeria, Egypt and Kenya), timber and manufacture ofwood and cork products (Cameroon) and food processing (Mauritius). Morocco enjoys a comparativeadvantage in several manufactured products, various food processing industries, chemicals, etc. Thusthere is potential for Africa to compete with China in selected manufactures. China also provides anopportunity to build industrial linkages.There is a negative correlation between the intensity of trade with China and the degree of an Africaneconomies’ comparative advantage in manufactures and processed goods. This suggests that trade withChina does not, on balance, encourage the expansion of Africa’s manufactures and processed goodsindustries. Thus trade with China could encourage African economies to remain specialized in raw materials, which implies high vulnerability to commodity prices and a higher probability of corruption.In respect to the impacts of China on African exports in the international market, the estimation of theeconometric model has proven the existence of negative impact of China on the exports of Africa. Inother words, there is an evidence of displacement effect. Particularly, one unit increase in the Chineseexports causes a decline of about0.063percent in African exports of the same product over the sameyear. Most of the controlling variables have gotten the expected signs, while one unit increase in theexporters GDP growth rate goes together with0.071percent rise in African exports. Likewise, onepercent increase in the importer GDP growth would lead to a rise of about0.04in African exports. Thedummy variables that were included to capture the transaction costs, namely; distance and the dummyof landlocked, have a negative and significant sign, suggesting that these two variables represent astructural barrier for African exporters. On average, the magnitude of the effect is in line with thatobtained for the whole manufacturing. Especially, the sector of machineries and equipment has seen thestrongest displacement effect. In line with our expectations as well as with the existing literature, thedisplacement effect in the textiles industry is confirmed. Moreover, a1percent increase of Chineseexports growth of textiles products goes together with a reduction in African exports in the same sectorof the0.037percent. In relation to the chemicals sector, it reports a negative coefficient for Chineseexports. A look at the variable of the regional trade agreements with respect to the different sectors.Especially, results suggest that African regional trade agreements have positively contributed to itsexports of machinery and equipments and textiles.Based on these results, the study concluded and recommended that China’s growing demand forresources does offer significant opportunities to many African economies. But the lesson which can bedrawn from international experience is that the benefits of this resource boom will not followautomatically, as they need effective management. Second, resources are often finite and prices areoften cyclical. There is thus a clear need to husband resource to ensure that the fruits can be drawndown over time, rather than at a single point in time. Third, and related, one of the major problemsposed by a growth in commodity prices is the impact on exchange rates–the “Dutch Disease”. Higherexports and raised prices often lead to currency appreciation. This creates problems for other exportingsectors, and promotes forms of structural change which lead to a reallocation of resources from thetraded-to the non-traded goods sectors. Although little is known about the detailed impact on China’strade on African patterns of income distribution, there are reasons to believe that it will be verysubstantial. On the positive side, one of the major implications of growing imports of manufacturesfrom China is the benefits which this provides to consumers, particularly to low-income consumers. Itis however an unmeasured impact and we do not have idea of its overall significance in consumerwelfare, nor in which sectors the primary benefits are being felt. On the one hand, employment in manylabor-intensive manufacturing sectors is being lost, most visibly in export-oriented clothing enterprises.Moreover, in the business literature, this is referred to as the development of “dynamic capabilities”.This involves a combination of search-capabilities, strategic-formulation-capabilities andimplementation-capabilities, as well as the capacity to continually change these as new threats andopportunities arise. There is however one capability which is required, and that is the ability of Africanproducers to anticipate future opportunities and threats opened-up by sustained Chinese expansion.Finally, it is abundantly clear from the discussion above that we know more about the questions whichhave to be addressed on China’s impact on Africa than on the nature of these impacts. There are significant knowledge-gaps, and unless these are filled, policy-and capability-development will beundermined and may be misdirected. We can conclude that in order to understand China’s growinginvolvement in Africa, it is as important to focus on the geostrategic and political imperatives, as on thenarrow pursuit of financial gain. But, other than this, we cannot at present draw any conclusions withconfidence. We cannot assess whether on balance China’s impact is likely to be positive or negative,and for which countries and regions, and for which particular stakeholders in particular countries andregions.In order to widen and deepen the policy perspectives, key knowledge gaps need to be addressed,amongst which the following are most important: the need for base-line studies to assess the changingfuture impact of China on Africa; analyses of the determinants of Afrcican competitiveness and thesteps required to enhance productivity (for example, in clothing, textiles, footwear and furniture, aswell as in export-oriented foodcrops); a more thorough assessment of indirect impacts of China’s tradeon Africa, facilitating the development of appropriate policies for providing special and differentialtreatment to low income African economies in global markets; determining the impact of China onconsumer welfare, income distribution and absolute poverty levels in SSA, through an analysis of theconsumer benefits derived from cheaper imports and the distributional implications of a switch inspecialization away from labor-intensive manufactures to capital intensive commodities; and diffusinglessons from the successful experience in coping with the challenges posed by China, drawn both fromwithin Africa and from other regions. |
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