China's Trade with Sub Saharan Africa: Challenges and Opportunities for Growth-inducing Structural Change
Date
2012-07-19
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Abstract
In my research project, I analyze the impact of the rapidly growing trade relations between Sub Saharan Africa (SSA) and China on SSA's development prospects, as trade is one of the most important channels through which China's impacts may be transmitted to the domestic economies in SSA. The study focuses on growth-inducing structural change as the basis for sustained growth of the region, since development history has shown us that the structure of the economy is an important determinant of the long-term growth prospects.
Growth-inducing structural change entails the movement of capital and labor from low value-added to high value-added production. Through exploring trade, I attempt to answer the following questions: How has the China-SSA trade structure evolved since China's accession to the World Trade Organization in 2001? What threats and opportunities do the trade relations of the past decade pose for SSA? Do the Sino-African trade relations allow SSA to develop domestic industries that encourage structural change and lead to sustained growth? Or does China reinforce SSA's dependence on natural resource exports?
In order to examine the challenges and opportunities that the trade relations pose for SSA economies, I utilize a framework proposed by Raphael Kaplinsky, which classifies the effects of the Sino-African trade relations into two groups: complementary - when both trade partners benefit, and competitive - when domestic production in Sub Saharan African economies is threatened by China. The complementary and competitive effects are further decomposed into direct and indirect effects. Direct impacts arise when countries directly interact with one another. Indirect impacts are those that result from China's relations with third countries, but that can still substantially affect SSA.
My main contribution lies in extending Kaplinsky's framework to encompass structural change. Adding structural change to the framework displays the complexity of China's effects, which depend on the existing comparative advantage and economic structure of individual economies. It becomes evident that even when China's impacts on SSA are classified as complementary, these effects do not automatically lead to growth-inducing structural change. The findings are based on the bilateral trade data from UN Comtrade as well as the empirical studies in the field. The data focus on the changing trade structure and trends between China and SSA from 2000 to 2010. Investigating the changing technology composition of SSA's countries trade over time is also an important addition I make to the existing literature.
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Keywords
Trade, Sub Saharan Africa, Africa, China, Structural Change, Economic Development