China's Trade with Africa and the Middle East: A Tale of Markets, Politics, and Resources

Abstract

Trade between China, Africa and the Middle East has rapidly expanded over the past thirty years. However, the economic relations between China and these countries has displayed a remarkable amount of diversity across countries, over time, and for different kinds of trade. I utilize this heterogeneity to analyze the determinants of Chinese trade with 65 countries in Africa and the Middle East over the period 1985-2008. I find that Chinese trade is influenced by three factors: access to local markets, securing natural resources, and foreign policy as proxied by a country's diplomatic relations with Taiwan. The presence of an export processing zone and Chinese FDI act as gateways for imports of differentiated goods from China. China also appears to be using trade as a political tool, as countries that recognize Taiwan have significantly less trade with China, though trade rapidly increases once a country severs relations with Taiwan. Interestingly, exports of homogeneous goods to China appear to be unaffected by the Taiwan issue, perhaps suggesting that China's need for natural resources trumps any foreign policy considerations. The heterogeneity of trade determinants is an important result given the rather monolithic treatment Africa often gets in the existing literature.