October 5, 2012, by China Policy Institute
China-Africa Trade Policies: An observation from economic geography
by Lauren Johnston.
As with earlier trade patterns, resources dominate Africa’s exports to China. Mining and fuel products comprised over 80 percent of Africa’s exports to China in 2011. This has helped to produce some of the world’s fastest-growing economies, including Angola and Zambia. However, cases of Dutch disease and negative shifts in the terms of trade have weakened growth elsewhere. China’s manufacturing prowess has furthermore indirectly increased competition in both home and third export markets.
These trends and their multipliers brought South Africa’s President Zuma to suggest that “If Africa continues to just export raw materials to China while importing Chinese manufactured goods, the African continent could be condemned to underdevelopment”. China has committed to increasing imports from Africa and to optimizing the structure of China-Africa trade. It has a number of related policies in place, including Least Developed Country (LDC) trade preferences and support for investment zones. Despite these efforts, uncertainty persists as to how to make the most of the seemingly elusive chance of China. During Zambian President Sata’s 2006 election campaign he famously referred to Chinese investors as ‘infestors’. In 2011 President Zuma is reported to have asked: “How do we trade with China in a way that benefits us as well?”
From the perspective of economic geography, recent growth patterns in developing economies can be divided into three typologies: resource-rich; resource-poor and coastal; resource-poor and landlocked. Since 1960, Asian and Latin American coastal and resource-poor economies have led broad regional industrial transformations. This type of economy in sub-Saharan Africa had the largest growth gap from the international developing country average, inhibiting a similar transformation.
Africa’s coastal and resource-poor economies are also geographically smaller, less densely populated and further from international market agglomerations. According to Venables (2008) Africa’s key need is “to enable its coastal, resource-scarce economies to surmount the threshold entry barrier constituted by its lack of agglomeration economies in labour intensive manufactures. Africa needs temporary protection from Asian competition in OECD markets.”
It is perhaps worrying then that China’s emerging policy toolkit for facilitating African growth appears relatively favorable toward countries of the resource-rich typology. Using a list of resource-rich countries identified in a 2007 paper of Collier and O’Connell, resource-rich sub-Saharan African countries are host to three of the first five Chinese special economic zones, with the remaining two in a landlocked country and on an island. There is also a higher density of LDCs among resource-rich countries, giving them proportionately greater access to trade preferences. And since many of these have sovereign-port access they are theoretically better pre-disposed to utilize trade preferences also. Even indirectly there are signs that sub-Saharan African resource-rich countries are less threatened by trade with China: these economies are proportionately more likely to recognize China as a market economy ahead of WTO stipulations.
Away from underlying explanations offered by endowment-based trade models, such observed patterns in trade policies might in practice help to explain yet also compound the fact that resource-poor and coastal African economies have the lowest average export dependencies with China. Import dependencies by comparison are largely consistent across groups. If there is relevance in patterns of transformative regional industrialization in Asia and Latin America to the case of sustainable growth in Africa, these comparatively weak trade development ties between China and coastal resource-poor Africa may be an area for the further attention of China-Africa policy makers and trade specialists.
Lauren Johnston is a PhD Candidate at the School of Economics, Peking University
Opinions expressed in the CPI blog do not represent the views of the China Policy Institute or the School of Contemporary Chinese Studies at the University of Nottingham. They are the personal views of the bloggers/authors.