Abstract
The rapid growth in China’s domestic investment in recent decades has generated a large appetite for global goods, including from sub-Saharan Africa (SSA). This paper estimates the impact of changes in China’s investment growth on SSA’s exports. Although rising trading links with China have allowed African countries to diversify their export base across countries away from advanced economies, they have also led SSA countries to become more susceptible to spillovers from China. Based on panel data analysis, a one percentage point increase (decline) in China’s domestic investment growth is associated with an average 0.6 percentage point increase (decline) in SSA countries’ export growth. This impact is larger for resource-rich countries, especially oil exporters. These effects could be mitigated, however, to the extent that countries can reorient their exports.
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Notes
See IMF (2011).
FOCAC (2012), “The Fifth Ministerial Conference of the Forum on China-Africa Cooperation Beijing Action Plan (2013–2015).”
These banks include Exim Bank (China Export–import Bank), China Development Bank (CDB), and China Export and Credit Insurance Corporation (SINOSURE).
Equatorial Guinea’s exports to China have decreased in the last decade, likely as the result of the export ban on logs since 2008 and the rapid increase of hydrocarbon exports to the U.S. and Europe. China is the largest importer of timber from Equatorial Guinea.
See Appendix for country lists.
We also used the GDP growth rate in the euro area as an alternative control variable. The results are similar.
We used equivalent terms in U.S. dollars as a robustness check. The results are similar.
Note that each variable is tested for unit root using the Fisher’s test, with the null hypothesis against the alternative that at least one series (country) in the panel is stationary. The null hypothesis is rejected for all variables.
China’s FAI annual growth rate varied between 6 and 56 % in 1995–2011; the standard deviation was about 9 percentage points (Table 2)
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Acknowledgments
The authors are grateful to Deborah Brautigam, Paolo Mauro, Roger Nord, and participants in an internal seminar at the African department for helpful comments; and to Emily Forrest, Cleary Haines, Brian Jee-Yeon Moon, and Fan Yang for assistance with the data; and to Albert William Nyikuli, Charlotte Vazquez and Winifred Ellis for editorial assistance. We also appreciate the comments and help from the IMF’s China-Africa group and from a seminar in the IMF’s African Department. We are solely responsible for the paper.
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The views expressed in this paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. This paper describes research in progress by the author(s) and is published to elicit comments and to further debate.
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Drummond, P., Liu, E.X. Africa’s Rising Exposure to China: How Large Are Spillovers Through Trade?. Int Adv Econ Res 21, 317–334 (2015). https://doi.org/10.1007/s11294-015-9537-9
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DOI: https://doi.org/10.1007/s11294-015-9537-9