Commodity exports to China and economic growth

Abstract

Purpose – The purpose of this study is to empirically examine the effect of commodity exports from Africa to China on the growth rate of per capita gross domestic product (GDP) after controlling for variables that have been found to be important determinants of economic growth. This study uses a panel of 23 African countries for the period of 2001-2011. Design/methodology/approach – The authors make use of a Barro-type empirical economic growth model which uses per capita GDP as the dependent variable. With regard to independent variables, the authors examine the China effect after controlling for variables that have been found to affect economic growth. To account for the China effect, we use the following three measures of trade with China: commodity export to China, commodity export to China relative to total export and commodity export to China relative to the world. The authors use panel data from 2001 to 2011. Findings – Results indicate that the magnitudes of the effect, while statistically significant, are not large enough to induce positive growth rates. The results also indicate that the magnitudes of the effects depend on the colonial origin of the African countries. Research limitations/implications – The data are limited to the 2001-2011 time frame because of data availability issues. This time frame does capture the era when China increased its trade with Africa. The choices of variables were also affected by data availability. However, the authors managed to find data on the main drivers of economic growth. Further research is needed to gain a more comprehensive analysis of the effects of commodity trade with China on Africa’s economy, given the partial character of the data set used in this study. Similarly, there is also a need for more detailed information on China’s trade activities. Practical implications – While the results of this study show an improvement in the per capita growth rate, the changes are not large enough to put African countries on a path to a sustained prosperity. African governments which trade with China should consider investing more in manufacturing, so that they create more jobs locally and benefit more from their exports. Social implications – The China–Africa relationship shows a small positive impact on societal well-being. Originality/value – To the best of the authors’ knowledge, none of the existing studies on China–Africa relations attempted to understand the impact of China’s economic activity on the standards of living of African residents, where standard of living is measured by economic growth. The current study aims to bridge this gap. This study complements existing studies and uses a data set and methodology that has not been used before on this issue.