Publication: The Impact of Rising Chinese Trade and Development Assistance in West Africa
The rapid economic rise of China over the last twenty years has sustained high global demand and prices for primary commodities such as oil and minerals, greatly benefitting Sub-Saharan (SSA) African countries. China now represents more than 20 percent of SSA's trade, up from just 2.3 percent in 1985. West Africa's share in China's trade is still quite low, 0.6 percent in 2012, but it is rising rapidly. Exports to China - oil, iron, phosphates, gold, cotton, cocoa and cashew nuts, have grown fast. However, they have not grown as rapidly as imports, resulting in a large trade deficit with China (13 percent of West Africa's GDP over 2009-2012). Reasons include a strong consumption demand for inexpensive Chinese products as well as the import-content requirements in development assistance agreements. Looking at the impact of China on West Africa, it appears that West African producers do not compete with China on third markets; by and large their products are complementary. However, West African producers are finding difficult to compete with China in their own domestic as well as in regional markets. The paper's main messages are as follows: Chinese demand for primary commodities is likely to continue in the near future, potentially benefitting West Africa. To maximize these benefits, West African countries need to maintain macroeconomic stability and to design appropriate policies to manage the volatility of commodity prices while raising the competitiveness of the economy. The current stagnation of the agricultural and manufacturing sectors in many West African countries is a sign of Dutch disease effects that should not be underestimated and need to be readdressed; and while the specific reforms needed vary from country to country, they should be comprehensive enough to generate a shift in the policy stance aimed at increasing productivity and encouraging diversification in the tradable sector. Examples of such reforms include the removal of trade restrictions among West African countries, the dismantling of formal and informal trade barriers to regional processing activities and the improvement of trade logistics.
“Pigato, Miria; Gourdon, Julien. 2014. The Impact of Rising Chinese Trade and Development Assistance in West Africa. Africa trade practice working paper series;no. 4. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/18961 License: CC BY 3.0 IGO.”