The rise of China: a new fear of trade competition for Mauritius?

Abstract

PurposeThe relationship between China and Mauritius dates back centuries due to the Chinese diaspora in Mauritius. The rise of China in the global economy has raised several questions. China is investing massively in several nations. The question remains whether it is for mutual benefits or the Chinese quest for world dominance. China is the second top importing partner of Mauritius. However, the main export destinations of Mauritius remain Europe and the USA. The purpose of this paper is to address the impact of the emergence of China on the Mauritian economy.Design/methodology/approachIn order to assess the short‐term costs stemming from Chinese competition, the authors have built two indexes of trade competition. The aim of these indexes is to compare the exporting structure of China with Mauritius in a particular period of time. If the exporting structure between two countries is quite similar, then trade competition is more likely. These indexes are built using the Comtrade database. The indexes are modified versions of the well‐known coefficient of specialisation (CS) and coefficient of conformity (CC). These two indexes examine and compare the exporting structure of Mauritius and China to finally show the degree of trade competition between the two economies. Further the paper adopts the Engle Granger procedure to assess the impact of import competition from China.FindingsUsing two indexes of trade competition, it is found that both countries have similar export structure. The authors presume that it will be impossible for Mauritius to compete with China mainly because of the latter's cheap labour advantage and natural resources availability. Further, it was found that while Mauritius is consolidating its revealed comparative advantage (RCA) in its two top exporting products, China's RCA is increasing in those products where that of Mauritius is decreasing. Finally, it was found that an increase in real GDP per capita will have a positive impact on Mauritius and there is no relationship between the two countries' openness.Originality/valueTo the knowledge of the authors, this is the first study attempting to assess the impact of the rise of China on the Mauritius economy. Further, the analyses make use of a both statistical and econometric analysis to tackle the problem in hand.