IS CHINA CROWDING OUT SOUTH AFRICAN EXPORTS TO SUB-SAHARAN AFRICA? Lawrence Edwards (UCT) Rhys Jenkins (UEA)
GROWING INVOLVEMENT OF CHINA IN SUB-SAHARAN AFRICA • Trade links - total trade between China & SSA increased from US$7.5 bn. to US$113 bn. (2001-2011) • Chinese FDI in Africa – US$13 bn. In 2010 • Chinese technical cooperation • Most of the discussion has related to the role of China in oil, mining and infrastructure projects; less attention to manufacturing.
CHINA, SOUTH AFRICA AND SSA • Chinese exports to SSA increased 13-fold 2001-2011 (mainly manufactures). • Some studies looking at impacts on domestic market in destination countries. • None looking in detail at implications for South African exports to these markets. • SSA an important market - 22% of total SA exports of manufactures
RESEARCH QUESTIONS • Are China and South Africa competing with each other in SSA markets, how extensive is such competition and how is this changing over time? • To what extent has Chinese competition led to the displacement of South African exports? • In which countries have South African exports been most affected? • Which South African export sectors face the greatest threat from Chinese competition?
POTENTIAL IMPACTS OF CHINA ON SA EXPORTS • Most studies of impact of China on other countries’ exports focus on products which both countries export (intensive-intensive margin). • But over half of growth of Chinese exports to SSA have come through entry into new products (extensive margin). • Important to look at both intensive and extensive growth by China and to see how these affect South African growth at both intensive and extensive margins.
GRAVITY MODEL • Estimating equation derived from a gravity-type trade model. and iis the exporter, j is the importer, k is the product and t is the year, and DSA is a South African dummy variable. A positive sign for 2 indicates the Chinese exports affect South African exports positively relative to alternative export suppliers.
SUMMARY OF RESULTS • South Africa is less likely (relative to other exporters) to export a product to a market where China already exports or enters (extensive-extensive margin). However, this effect is felt at the margin with only a minor impact on the value of SA trade flows. • In product-market combinations that overlap for China and South Africa, Chinese export growth negatively affects South Africa’s exports relative to other countries (intensive-intensive margin). • Chinese export growth in particular product-market combination reduces probability that SA exports in the same product-market combination (relative to other countries) (Intensive-extensive margin), but the overall impact on the value of SA exports is low.
IMPACT ON SA EXPORTS • Seen that there competition between Chinese and SA exports to SSA has increased significantly over time. • Some evidence that Chinese exports have negative impacts on SA exports of the same product. • Now try to quantify the size of this impact. • Two approaches: • Simulation using the coefficients from the econometrics • Decomposition using extension of CMS analysis
SECTORS MOST AFFECTED BY CHINESE COMPETITION • In absolute terms • Electrical and electronic equipment • Boilers and machinery • Iron and steel and products of iron and steel • Vehicles • In relative terms • Textile and apparel Partly reflects low level of exports (at end of period)
CONCLUSIONS • Limited competition between SA and China in late 1990s. • Increasing competition post-WTO accession – result of Chinese expansion at both extensive and intensive margins. • SA exports to SSA markets 10-20% lower in 2010 compared to counterfactuals. • Up to now impact on SA exports has been less pronounced in neighbouring markets (Zimbabwe, Malawi and possibly Zambia). • Although SA exports have declined in relative terms and this is partly attributable to crowding out by Chinese products, this has not meant a decline in the value of SA exports to these markets.