THE RISE OF CHINA AND
THE CHALLENGE TO
DEVELOPMENT STRATEGY
IN SSA
Raphael Kaplinsky,
Dept of Policy and Practice,
The Open University,
UK
Qiaotou
• In a remote area of China
• First commercial workshop making buttons
established in 1980
• Now 700 factories, making 15bn buttons and 200m
metres of zips
• 1,300 button shops selling 1,400 varieties of buttons
• 60% of global button production and most of China’s
zip production (80% of world production)
Guardian, 25th May 2005
China’s growth is not unique..
GDP (constant prices)
3.5
Log of export growth
Log of GDP growth
Growth of exports
3
2.5
2
1.5
6
5
4
3
2
1
0
1
1
6
11
16
21
26
31
36
6
11
16
21
26
31
36
Years from beginning of growth surge
41
41
Years from beginning of export surge
China (1989-2003)
China (1989-2003)
Japan (1960-2003)Japan (1960-2003)
Korea (1963-2003)
Korea (1963-2003)
Special Issue World
Development, Vol. 36, No. 2,
February 2008
http://asiandrivers.open.ac.uk/
A taxonomy for assessing the impact of Asian Drivers on
other economies
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
The impacts may be competitive or complementary
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
And they may be direct or indirect
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
We know much more about the direct impacts
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
From the rich country perspective, we tend to focus on the
competitive effects
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
But in SSA, the complementary impacts are often much
more visible
Vectors
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Direct
Indirect
Complementary
Trade
Production and
FDI
Finance
Competitive
Complementary
Competitive
Complementary
Competitive
Governance
Complementary
Competitive
Migration
Complementary
Competitive
The drive to industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
Commodities-manufactures terms of
trade
The drive to industrialisation
• Close association between incomes and
industrialisation
• The terms of trade favour manufactures
• Manufactures are (relative to agriculture) income
elastic and price inelastic
• Synthetic substitutes for natural products
• Manufacturing embodies rents – agriculture does
not
• Manufacturing can be labour intensive – primary
commodities are very capital intensive
The orthodoxy
Manufacturing exports are key:
• Competitive effects
• Scale effects
• Learning effects
Share of manufacturing value added
Share of the
world
1985
East Asia
China
South Asia
Latin America and Caribbean
Sub-Saharan Africa
Middle East, North Africa, Turkey
4.1
1.4
0.8
6.7
1.0
1.5
1998
13.9
7.0
1.8
5.2
0.8
2.4
Share of developing
countries
1985
1998
29.2
10.2
5.9
46.9
7.1
10.8
57.7
29.3
7.3
21.8
3.4
9.8
World Manufacturing Export Price,
1986-2000
Annual price change (%)
25
20
15
10
5
0
-5
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
-10
IMF, World Economic Outlook Database
EU Imports from China
1st Q 2005/1st Q 2004
China Market Share in EU-25
Imports
Volumes %
Price %
1 Q 2004 %
1 Q 2005 %
T-shirts
164
-26
7
17
Pullovers
534
-47
6
38
Men’s trousers
413
-16
6
35
Blouses
186
-24
6
22
Women’s coats
184
-18
6
10
Bras
139
-15
30
49
Socks and
pantyhose
63
-22
30
54
Linen and ramie
yarns
51
1
27
45
Linen fabrics
257
1
10
45
Source: Euratex data as reported by Nathan Associates
Resource based
manufactures
Low technology
Medium technology
High-income
Upper-middle-income
Lower-middle income
China
Low income
High income
Upper-middle-income
Lower-middle income
China
Low income
High-income
Upper-middle-income
Lower-middle income
China
Low income
High-income
Upper-middle
Lower-middle
China
Low income
% of sectors
Caught between a rock and a hard
place
70
60
50
40
30
20
10
0
High technology
Percentage of sectors with negative price trends, 1988/92000/2001 by technological intensity and country-grouping
Actual and projected global share of
China’s consumption of base metals
30%
25%
% of total
20%
15%
10%
5%
0%
1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Coppe r
Source: Macquarie Mining
Alum inium
Zinc
Nick e l
Ste e l
Iron Ore (Trade )
China's Share of Global Demand
China's Share of Total World
Growth
26%
100%
99%
95%
24%
90%
22%
76%
73%
68%
67%
51%
50%
20%
18%
16%
14%
8%
0%
Steel
Nickel
Copper Aluminium
Source: Macquarie Mining
2003
10%
2002
10%
2001
20%
2000
12%
1999
30%
1998
2000-2003
1995-2003
1997
40%
1996
% share
60%
% of total World
80%
70%
Steel
Nickel
Copper
Aluminium
1995
100%
28%
Enormous demand potential
Kgs/capita
Aluminium
Copper
Steel
GDP per capita
($US1995)
Japan
1955
1975
0.6
10.5
1.2
7.4
80
599
5,559
21,869
Korea
1975
1995
1.0
15.0
1.3
8.1
84
827
2,891
10,841
China
1990
1999
2002
2003
0.7
2.3
3.3
4.0
0.6
1.2
2.0
2.4
59
108
160
200
342
756
933
1,103
The agricultural sector, 2007-2016
(OECD/FAO, 2007)
• Biofuels raise grain prices
• Raised demand in China for:
–Beef
–Pigmeat
–Milk powder
–Oilseeds for cattle
 “…structural
changes such as increased
feedstock demand for biofuel production, and the
reduction of surpluses due to past policy reforms,
may keep [agricultural product] prices above
historic equilibrium levels during the next 10
years….
 Winners are:
 Brazil (sugar, oilseeds, meat)
 Argentina (cereals and dairy products)
 Russia/Ukraine (coarse grains)
 East and south east Asia (rice, veg oils, poultry)
SSA’s Recent Experience with
growth, industrialisation and exports
Annual growth rates 1998-2005 (%)
World
SSA
China
India
GDP growth
2.9
3.7
8.9
6.4
Agricultural value added
2.3
3.6
3.5
2.4
Industrial value added
2.2
3.6
9.9
6.2
Manufacturing, value added
2.5
2.5
NA
6.1
Services value added
2.9
3.7
9.6
8.3
Share of Manufacturing in GDP
1995
2000
2004
Africa
12.1
12.3
12.1
China
34.7
36.7
39
India
16.3
15.7
15.0
Developing (excl China)
19.2
20
20.4
WORLD
19.8
20.1
19.9
SSA: Growth of merchandise trade, 1998-2004 (%)
Exports
Imports
World
8.8
9.0
SSA
12.5
8.1
China
21.4
26.5
India
13.8
14.5
Composition of SSA exports
2005
Oil/Gas as % of Total
47%
Manufactures as % of Total
21%
Broad and narrow manufactures
Narrow manufactures are total manufactures
minus
–diamonds
–precious stones
–re-exports
–oil and gas by-products
–uranium
SSA Manufactured exports excl SA
($mn)
1995
2000
2005
“Broad Manufactures"
6,039
6,838
12,453
“Narrow Manufactures”
2,668
3,435
4,641
Narrow as % total
44
50
37
Share of SSA (excl SA)
manufactured exports (%)
1995
2000
2005
Apparel
41
48
50
Textiles
8
5
3
Value of SSA and China C+T exports to US, 2004/2006
AGOA
-26
85
Kenya
-5
113
Lesotho
-15
171
Madagascar
-26
108
Mauritius
-48
104
SA
-53
89
Swazi
-24
136
Technological Intensity of SSA’s trade: Share of
exports comprising different categories of products,
2005 (%).
Primary Commodities
Resource Based
Low Technology
Medium Technology
High Technology
World (excl. China, India)
67
16
4
9
1
China
81
15
1
2
0.1
Intra-SSA
17
35
13
23
5
Number of countries accounting for 90% of SSA Exports (excl SA)
25
20
15
10
5
0
Agricultural Materials
Ore and Metals
Fuels
Share of SSA fuel exports
50%
40%
30%
20%
10%
0%
Nigeria
Angola
Equatorial
Guinea
Congo, Rep.
Sudan
Share of SSA exporters of ores and minerals (excl SA)
30%
20%
10%
0%
Mozambique
Zambia
Guinea
Mauritania
Congo, Dem.
Rep.
Share of SSA agricultural exports excl SA
30%
20%
10%
0%
Cote d'Ivoire
Kenya
Ghana
Cameroon
Nigeria
SSA EXPORTS
SA, Lesotho,
Swaziland,
Madagascar,
Kenya, Mauritius
Hard
commodities
Clothing
footwear
SSA LOSS
SSA GAIN
Oil exporters, Zambia, SA, DRC,
Botswana, Ghana, Gabon, etc
CHINA
IMPORTS
CHINA
EXPORTS
All SSA
Oil
SSA LOSS
SSA GAIN
Most SSA
SSA IMPORTS
Clothing
footwear
So what?
• A complex picture with nuanced impacts and
opportunities
• Imbalances in the global economy
• We don’t know the spread effects
• How long will the terms of trade reversal last?
Regarding precious stones and
hard commodities
• Descent into conflict?
• The economic management of mineral rents
– stability
– over time
• Impact on other sectors (“Dutch Disease”)
• Adverse distributional effects
• But this is a small gorup of countries
Regarding soft commodities
• How to take maximum advantage, and speedily
• How to maximise positive distributional impact by
including small scale producers
• Also addressing niche sectors
Regarding manufactures
• Manufacturing is the source of capability-growth
and employment
• But the Washington Consensus circumscribes
trade and industrial policies,
• So:
–How to protect producers in the local market?
–How to maintain access to external markets
–How to sustain industrial policies
Conclusions
• Indirect impacts are more important direct
ones
• A problem for the future as well as the
present
• Relevance to the rest of the world?
• Open playing field? – tilted against whom?
• What attraction does globalisation hold for
SSA?