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China and Africa : expanding economic ties in an evolving global context (English)

Economic growth in Sub-Saharan Africa (SSA) has averaged roughly 5 percent per year over the past decade, improving living standards and bolstering human development indicators across the continent. Stronger public institutions, a supportive, private sector–focused policy environment, responsible macroeconomic management, and a sustained commitment to structural reforms have greatly expanded opportunities for countries in SSA to participate in global markets. In recent years, many countries in the region have benefited from an increasingly favorable external environment, high commodity prices, and an especially strong demand for natural resources by emerging economies, particularly China. Over the longer term, leveraging Chinese investment to support broad-based growth will require policies designed to boost the competitiveness of sectors in which China’s economic rebalancing may create a comparative advantage for SSA. To date, few African countries have been able to benefit from large-scale Chinese investment outside the resource sector. However, as China’s growth slows and its economy shifts toward a more consumption-driven model, it is likely that global demand for resource imports will slow as well. Countries with the most heavily concentrated export mix, particularly in the mineral and oil sectors are the most vulnerable to China’s economic rebalancing and should be ready to adopt measures to mitigate the impact of negative terms-of-trade shocks. By contrast, as wage rates in China continue to rise and firms refocus their attention on domestic demand, countries in SSA will be well positioned to exploit emerging opportunities for investment in export-oriented manufacturing. Ethiopia provides an instructive example, as its inexpensive yet relatively skilled labor force, coupled with the government’s proactive efforts to court Chinese investors, have enabled Ethiopia to attract substantial investments in labor-intensive industries. Infrastructure enhancement, workforce development, and good-governance reforms offer a promising strategy for many countries in the region. Although the establishment of industrial zones has yielded mixed results, several salient success stories warrant careful attention. This report discusses how Africa could take advantage of the untapped opportunities offered by China’s progressively intensifying investment and trade ties with SSA. It is hoped that this analysis will enrich the ongoing dialogue between policy makers, private firms, and civil society regarding China’s increasingly important role in the growth and development of Sub-Saharan Africa.

Details

  • Author

    Pigato,Miria A., Tang,Wenxia

  • Document Date

    2015/03/01

  • Document Type

    Working Paper

  • Report Number

    95161

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    China,

    Africa,

  • Region

    East Asia and Pacific,

  • Disclosure Date

    2015/03/20

  • Disclosure Status

    Disclosed

  • Doc Name

    China and Africa : expanding economic ties in an evolving global context

  • Keywords

    World Integrated Trade Solution;Trade and Foreign Direct Investment;rate of return on capital;International Trade and Investment;information and communication technology;global financial crisis;offshore financial center;Natural Resources;real exchange rate;global economic crisis;growth and development;gross fixed capital;international commodity price;economic growth rate;policy and institution;undervalued exchange rate;competitive private sector;average household consumption;involvement in infrastructure;gross domestic product;human development indicator;offshore finance centers;preferential trade agreement;dynamic comparative advantage;export growth rate;pattern of trade;domestic fixed investment;nonrenewable natural resource;skilled labor force;competitive business environment;total factor productivity;Liquid Natural Gas;economies of scale;production and export;Merger and Acquisitions;coal mining sector;natural resource sector;exporting primary commodities;fiscal stabilization policy;small private firms;special economic zone;demand for coal;exports of oil;capital goods import;manufacturing sector;Capital Investments;Extractive Industry;Job Creation;Investment Flow;trading companies;industrial park;agricultural good;resource-rich country;global demand;private investment;Technology Transfer;manufacturing industry;company operating;negative effect;large-scale investment;Export Diversification;labor-intensive industry;producer price;private investor;financial service;subsidized credit;international donor;raw material;international standard;total stock;financial flow;global market;total trade;international market;foreign investor;anecdotal evidence;trade balance;manufactured goods;local market;parent company;Public Spending;exogenous shock;political change;oil production;tradable sector;production volume;import competition;financing arrangement;economic research;investment policy;fiscal revenue;agricultural sector;commodity producer;production cost;export product;base year;mining product;industrial growth;real wage;investment opportunities;import penetration;greenfield investment;shoe factory;good policy;local consumer;mineral ore;internet infrastructure;domestic labor;international production;private market;trade restriction;comparative disadvantage;gas field;production chain;average profit;manufacturing wage;geographical location;primary focus;mining corporation;offshore oil;coastal region;power station;credit line;limited competition;long-term agreement;resource right;cheap labor;Learning and Innovation Credit;stable for governance;domestic company;iron ore;trade protection;investment climate;local producer;profit margin;textile industry;light manufacturing;textile imports;sound investment;export opportunities;initial investment;regional market;export opportunity;transportation network;development phase;finance infrastructure;consumer market;transportation equipment;registration process;data quality;global export;consumer electronics;capital stock;procurement rule;production capacity;gradual process;domestic consumption;consumer goods;agricultural product;demand composition;regional economy;Real estate;Resource export;commercial bank;investor purchase;diplomatic relation;investment target;commercial service;geological prospecting;primary sector;state council;small sample;price gap;standard model;local subsidiary;trade relationship;finished product;economic relationship;renewable resource;oil sector;negative terms;imported inputs;Workforce Development;industrial zone;consumer price;civil society;agricultural commodity;relative trade;primary commodity;domestic demand;rapid industrialization;domestic producer;Exchange Rates;high tariff;agricultural import;consumption rate;living standard;Macroeconomic Management;external environment;high commodity;cashew nut;Emerging economies;emerging economy;development partner;commercial lending;domestic production;rapid urbanization;bilateral aid;cooperation initiative;energy import

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Citation

Pigato,Miria A. Tang,Wenxia

China and Africa : expanding economic ties in an evolving global context (English). Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/241321468024314010/China-and-Africa-expanding-economic-ties-in-an-evolving-global-context