Is Sino-African trade exacerbating resource dependence in Africa?

Abstract

Over the past decade, trade between China and Africa has rapidly expanded and has led to strong growth rates in Africa mainly buoyed by natural resource export. The boom in trade has partly been made possible by the use of resource-for-infrastructure swap agreements (the so-called “Angola-mode deals”), in which Chinese companies finance and build infrastructure in Africa in exchange for access to natural resources. The concomitant increase in resource export to China has however raised serious concerns that these trade arrangements may reinforce Africa's resource dependence rather than reduce it. In this article we use a dynamic panel data model to examine whether the Angola-mode deals have reinforced resource dependence and impeded export diversification in African countries. Our results indicate that by helping African countries reduce existing infrastructure bottlenecks, resources-for-infrastructure swap deals enabled them to increase their diversification capacity.