On the Unequal Exchange in China’s Economic Partnership with Africa

Abstract

ABSTRACT China’s economic engagement with Africa has expanded significantly in recent years. While some scholars highlight the engagement as critical for sustainable development in Africa, others argue that the rules of engagement tend to favor China and encourage unequal economic exchange. This article weighs into the discussion on unequal economic exchange. It uses international trade data from 1995 to 2015 to estimate the amount of unequal economic exchange in China’s trade with Africa. The estimate is based on a simple method that applies an exchange rate deviation factor to the trade flows between China and Africa, and further adjusts for the difference in labor productivity between the two trading regions. Results show significant unrecorded transfers of value from Africa to China, amounting to 2.5% of the total gross domestic product of African countries during the sample period. The article suggests several policy strategies to improve Chinese engagement with Africa and reinforce the continent’s progress towards sustainable development. In addition, the article provides a theoretical and empirical framework that can be useful for analyzing Africa’s trade engagement, not only with China, but with other regions of the world as well.