The South African Institute of International Affairs

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China and Southern Africa A Balanced Scorecard?

• Peter Draper
• Research Fellow
• Development through Trade Project

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OVERVIEW

• Contrasting fortunes
• Positive entries
• Negative entries
• Assessment

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1. Contrasting fortunes

• China
• Rapidly rising, modernising global power
• Spectacular growth and poverty reduction
• Expanding global footprint
• Southern Africa
• Marginalized from global economy
• Mired in poverty and chronic socio-political
  problems

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2.Positive entries

• The minerals-manufactures nexus
• Basic comparative advantage story
• Positive terms of trade effect (commodity prices)
• This should assist with debt management
• And underpin fragile balance of payments
• But for how long will this endure?
• And what about possible Dutch disease effects?
• And how will resource rents be managed?
• Agriculture exports
• This is a key area of relatively unexploited
  comparative advantage in Africa
• The sectors development is constrained by OECD
  subsidies and domestic supply-side issues
• But China is a net food importer and this is
  likely to continue
• Opportunities for investment and export
• Services exports and investment confined to SA?

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3. Negative entries

• Cheap manufactured imports
• Displace domestic production?
• And exports to third markets?
• Implications for labour-absorbing growth paths?
• Regional industrial trajectory?
• Condemned to primary products supplier status?
• But African economies are not competitive in
  manufactures
• Cheap imports are good for poor consumers
• Some countries have got rich from their resource
  base
• And the potential of agriculture needs to be
  unlocked
• Balance of payments
• Rapidly growing cheap imports implies balance of
  payments pressure
• But offset by resource exports
• Bilateral trade deficits are not problems in
  themselves it is the overall balance of
  payments that matters
• And the source of the deficit is of most
  importance

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4. Assessment

• Chinas rise poses a number of challenges
• But correctly managed the opportunities should
  outweigh the threats
• This raises the troubling governance question
• Managing resource rents in the interests of the
  country rather than elites
• Building supply-side capacities
• Investing in institutions to provide more
  effective governance of trade and investment
• Negotiating with China from a stronger,
  better-informed platform
• And directing Chinese expansion into areas of
  national interest