China and India in Africa
The making of the global hinterland
Similarities between India and China

High and sustained rates of growth of
aggregate and per capita national income



For longer in China than India, but growth
accelerating in India recently
Occurs in the context of integration through
trade, investment and financial liberalization
Increased presence in the global economy
China and India’s contribution to global
growth
2000
2001
2002
2003
2004
Global 6.9
4.8
4.6
5.7
growth
(% p.a.)
Percentage share of annual growth rates
7.4
China
15.8
23
25.2
23.4
19.9
India
6
7.3
8.2
9
7
India and China Relative to the World (Percentage Shares)
1978
1985
1995
2000
2005
Exports of goods and services (Constant 2000 US$)
China
1.4
1.9
2.6
3.5
7.6
India
0.4
0.4
0.7
0.8
1.2
Imports of goods and services (constant 2000 US$)
China
0.86
1.94
2.60
3.14
5.53
India
0.38
0.49
0.81
0.81
1.00
China
0.9
1.5
2.9
3.8
5.2
India
0.9
1
1.3
1.4
1.8
China
2.9
4.5
8.8
11
14.3
India
3.6
3.8
4.9
5.4
6.1
GDP (Constant 2000 US$)
GDP, PPP (Constant 2000
international $)
Importance of exports
Exports of goods and services (% of GDP)
40.00
37.30
36.77
33.95
35.00
30.00
25.00
23.07
23.33
20.33
19.17
20.00
China
18.20
India
15.00
13.23
11.00
10.00
10.00
6.64 6.19
7.15
5.38
5.00
0.00
1978
1985
1990
1995
2000
2004
2005
2006
Imports of goods and services (% of GDP)
35.00
32.90
31.40
31.74
30.00
25.00
23.29
20.86
20.92
20.02
20.00
China
15.66
India
14.15
14.13
15.00
12.20
10.00
7.11
7.77
7.83
8.56
5.00
0.00
1978
1985
1990
1995
2000
2004
2005
2006
Merchandise trade (% of GDP)
70.00
65.99
63.37
59.77
60.00
50.00
38.58
40.00
39.57
32.55
32.50
India
29.64
30.00
25.22
22.83
20.40
18.40
20.00
14.31
10.86
13.11
11.03
10.00
0.00
1978
1985
1990
1995
2000
2004
2005
China
2006
Related to differences in structure of
growth


Of the cumulative increase in GDP between 1991
and 2005, while 53 per cent was accounted for by
industry in the case of China (with 40 per cent from
services), as much as 62 per cent was accounted
for by services in the Indian case (with 27 per cent
from manufacturing).
Manufacturing growth strong in China accounting for
37 per cent of the increment in GDP in this period,
whereas the comparable figure for India was just 16
per cent.
Implications of patterns of growth



Fall-out of growth led by manufacturing in China in
terms of demand for non-manufacturing sectors, viz.
agriculture, mining and services likely to be
significant, if not strong
This is likely to impact on demand and growth within
and outside China
This would not be as true of India’s services-led
growth, which is likely to impact only on the demand
for manufactures and other services
Trends in the sources of imports (%age
distribution)
1980
China
INDUSTRIAL COUNTRIES
DEVELOPING COUNTRIES
OTHERS
India
INDUSTRIAL COUNTRIES
DEVELOPING COUNTRIES
OTHERS
1985
1990
1995
1999
2000
2005
2006
73.7
22.8
3.5
70.4
28.1
1.5
50.1
48.3
1.6
55.4
42.7
1.9
52.3
45.1
2.6
47.0
49.8
3.2
38.1
53.5
8.5
37.4
53.2
9.4
46.5
52.8
0.7
52.7
46.6
0.6
56.9
42.5
0.6
48.5
45.5
6.0
44.7
55.3
0.0
40.5
36.1
23.4
33.3
36.4
30.3
34.8
39.3
26.0
The evidence


A sharp shift away from imports from
developed to developing countries starting in
the mid-1980s in the case of China
The decline in imports from developed
countries is true in the case of India too,
though this is accompanied by a decline in
imports from developing counties and an
increase in unspecified categories.
China’s Developing Country Imports
(as % of world imports)
DEVELOPING COUNTRIES
OIL EXPORTING CTYS
NON-OIL DEVELOP.CTYS
WESTERN HEMISPHERE
MIDDLE EAST
DEV. CTYS: ASIA
AFRICA
DEV. CTYS: EUROPE
1980
22.8
1.4
21.4
3.7
1.8
8.7
1.5
7.2
1985
28.1
1.4
26.6
4.3
0.5
16.7
0.7
5.9
1990
48.3
2.5
45.8
2.4
0.9
38.3
0.6
6.1
1995
42.7
2.9
39.8
2.1
1.7
33.7
1.0
4.2
2000
49.8
6.0
43.7
2.4
4.5
36.7
2.4
3.8
2005
53.5
5.8
47.6
4.0
4.9
38.0
3.0
3.6
2006
53.2
6.5
46.7
4.2
5.4
36.8
3.4
3.4
Sources of China’s imports


In the second half of the 1980s, the sharp
shift in the sources of Chinese imports was in
favour of developing Asia
Subsequently, the increases have been
distributed to other part of the developing
world
India’s Developing Country Imports
(as % of world imports)
1980
1985
1990
1995
2000
2005
2006
52.8
46.6
42.5
45.5
36.1
36.4
40.3
AFRICA
1.4
2.4
2.8
4.6
6.1
3.2
1.5
ASIA
9.3
9.1
11.2
13.9
17.2
21.5
26.4
MIDDLE EAST
29.1
20.5
18.3
21.4
9.4
7.3
6.7
WESTERN
HEMISPHERE
2.5
2.6
2.2
1.5
1.5
1.7
2.6
10.5
12.1
8.0
4.2
1.9
2.6
3.1
DEVELOPING
COUNTRIES
EUROPE
Pattern of India’s imports



In India’s case, prior to liberalization, oil played an
extremely important role in shaping the sources of
imports.
With liberalization, Asia’s role as a source of imports
has been increasing rapidly, servicing India’s
manufactured import requirements.
Areas other than Asia, especially Africa, seem to be
dropping out, but there is a data problem here.
Cumulative post-1990 growth of imports
from Africa in dollar terms
8000
7000
6000
5000
4000
3000
2000
1000
0
1990
1992
1994
1996
1998
China
2000
2002
India
2004
2006
Cumulative post-1990s growth of imports from
Asia in dollar terms
1800
1600
1400
1200
1000
800
600
400
200
0
-200
1990
1992
1994
1996
1998
China
2000
India
2002
2004
2006
Cumulative post-1990s Growth of
Imports from Latin America
3000
2500
2000
1500
1000
500
0
-500
1990
1992
1994
1996
1998
China
2000
2002
India
2004
2006
Cumulative post-1990s Growth in Imports from Industrial Countries in
dollar terms
1000
800
600
400
200
0
-200
1990
1992
1994
1996
1998
China
2000
2002
India
2004
2006
Possible explanation


Growth based on manufacturing in China
needs more access to raw materials,
whereas growth based on services in India
may generate more demand for oil and final
manufactures.
China’s demand for primary raw materials
including agricultural raw material and metals
would be increasing.
China’s consumption of Industrial
Materials and Oil
1993–2002
World
China's
Consumption
Contribution
Growth
(Annual % change)Per cent
Metal
Aluminum
Copper
Lead
Nickel
Steel
Tin
Zinc
Oil
Source: IMF (2006)
3.8
3.5
3
4.4
3.4
1.3
3.4
1.5
38
43
42
12
38
34
42
21
2002–05
World
China's
Consumption
Contribution
Growth
(Annual % change)Per cent
7.6
3.8
4.3
3.6
9.2
8.1
3.8
2.2
48
51
110
87
54
86
113
30
Impact on commodity prices



One major impact of the China boom has been a degree of
buoyancy in commodity prices. While other factors have played a
role, but for China’s presence, commodity prices may not have
reflected the buoyancy they have.
Over the last five years there are signs of a reversal (however
temporary) of the long term trend in global commodity prices. By
the beginning of this decade commodity prices had fallen relative
to consumer prices (as measured by the US Consumer Price
Index) for over five decades. But from around 2002, commodity
prices have been on the rise.
While exporters of oil have been important beneficiaries, the
index of non-fuel commodity prices has also been rising.
Metal prices rose sharply because of
demand from China
Agricultural Price Indices
Obvious importance of non-fuel
commodities


Non-fuel commodities have a higher share in world
trade (about 14 percent during 2000–04) than fuel
commodities (7 percent).
Many developing countries are highly dependent on
non-fuel commodities as a source of export
earnings—36 countries have a ratio of non-fuel
commodity exports to GDP of over 10 percent, and
in 92 countries the ratio is over 5 percent. Indeed, in
many low-income countries (including in Africa), a
large share of export receipts is generated by just a
few commodities.
Africa a major beneficiary

The major beneficiary of these trends in commodity
demand and prices is Africa, in which China’s
presence has expanded substantially. African
exports to China started accelerating around 2000,
and have since risen at an annual growth rate of
more than 50 per cent. By 2004, African exports to
China touched $11.4 billion, reflecting a more-thanthreefold increase since 2000. By 2004 China
accounted for 6 per cent of total African exports to
the world.
Africa's exports as a percentage of its total exports
80.00
70.00
67.67
66.23
64.20 63.84
60.00
50.00
1991
40.00
1995
2000
30.94
2006
28.10
30.00
25.93
20.00
18.05
10.00
7.89
2.85
0.29 0.99
3.95
0.91 1.79
0.87
0.00
China
India
Developing ctrs
Industrial
Africa's imports as a percentage of its total imports
80.00
70.00
67.77
66.81
61.09
60.00
48.86
48.64
50.00
1991
38.36
40.00
37.88
1995
2000
2006
30.68
30.00
27.64
24.78
25.28
21.26
20.00
9.21
10.00
1.20 1.94
3.25
1.51
0.56 1.35
2.79
0.00
China
India
Non-oil developing ctrs
Developing ctrs
Industrial
Africa’s exports to India and China
Implications for Terms of Trade


One consequence of the rise in the volume and unit value of
commodity exports from Africa, are signs of the reversal (for the
present) of the long-term deterioration of net barter terms of trade
faced by developing countries dependent on primary products for
their export revenues that go to finance imports of manufactured
products.
With competition in manufactures export trade (influenced by
China) moderating price increases in manufactured goods, and
China’s demand driving up commodity prices, developing
countries as a group and Africa in particular that are still
substantially dependent on the exports of primary products, have
experienced an improvement in their terms of trade.
ToT and Purchasing Power of Exports
(2000=100)
Investment follows trade
Chinese FDI in Africa
Net Impact on Africa




The net result of all this is that the China boom has helped a
continent like Africa.
Real GDP growth in Africa rose from an average annual rate of
4.2 per cent during 2001-2004 from 3.3 per cent during 19972000. Sub-Saharan Africa gained even more with its real GDP
growth rate touching 5.4 per cent in 2004, which was an eightyear high.
The African Economic Outlook 2005 (AfDB/OECD 2005), among
others, attributes this improvement substantially to the rise in
commodity prices.
Further China’s interest in the region’s natural resources has
resulted in huge flows of aid and foreign investment from China
to Africa, bolstering the regions infrastructure and putting much
needed investment into the natural resources sector.
Is this a challenge to the old Imperialism


It is inasmuch as it gives other developing
countries a space to negotiate the process of
development
Africa still remains the hinterland, but:


With new partners other than the erstwhile
colonial powers
On terms that are improving