A silent feature of the recent developments in China’s economic engagement with Africa is that trade and other commercial activities have grown faster than aid flows. While China has stepped up ODA, aid flows relative to trade declined from 20–21 percent in 1990–92 to 3–4 percent in 2004–05.24 As discussed in Section III, China’s government policies, with the objectives of mutual benefit and win-win outcomes have facilitated this shift; here we look at other forces that are at work.
A. Markets for Exports Strong growth of the Chinese and African economies, together with the complementary trade pattern—China imports fuel and other commodities, Africa purchases investment and manufactured products from China—largely explains their surging trade in recent years.
With total imports of goods close to US$800 billion in 2006 and real GDP growth in double digits, China is a large and fast-growing market. Its imports from Africa grew at an annual average rate of over 40 percent between 2001 and 2006—twice as fast as its total imports for the same period. Meanwhile, since 2004 SSA has recorded growth in the 5–6 percent range, making the region an increasingly attractive market for investment and consumer goods.
Falling barriers to cross-border trade and capital flows may also have contributed to the recent rise in China-Africa trade. It is not coincidental that the trade picked up in about 2001, when China joined the World Trade Organization. WTO membership helped China to lock in the gains from multilateral trade liberalization; it also greatly reduced uncertainty about market access. Progress in regional integration in Africa through common currency and regional free trade arrangements also gave Chinese investors and traders incentives to exploit the economy of scale of an expanded regional market.25 IMF Working Paper African Department What Drives China’s Growing Role in Africa?
Prepared by Jian-Ye Wang October 2007
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