The African Department
Copyright © 2017
International Monetary Fund
Joint Bank-Fund Library
Names: Chen, Wenjie, Professor of international business, author. | Nord, Roger, author. | International Monetary Fund, publisher. | International Monetary Fund. African Department, issuing body.
Title: a rebalancing act China and Africa : the effects of China’s rebalancing on Sub-Saharan Africa’s trade and growth / Wenjie Chen and Roger Nord.
Other titles: Effects of China’s rebalancing on Sub-Saharan Africa’s trade and growth | International Monetary Fund. African Department (Series)
Description: Washington, DC : International Monetary Fund, 2017. | African departmental paper series | At head of title: The African Department | Includes bibliographical references.
Identifiers: ISBN 9781475583434 (paper)
Subjects: LCSH: Africa, Sub-Saharan--Foreign economic relations—China. | China - Foreign economic relations—Africa, Sub-Saharan. | Economic development—Africa, Sub-Saharan.
Classification: LCC HF1611.Z4C62 2017
The African Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper was prepared by Wenjie Chen and Roger Nord. The authors would like to thank seminar participants at the IMF and Peking University, Axel Schimmelpfennig, and the AFR Research Advisory Group members (Charalambos Tsangarides and Manabu Nose) for useful comments and suggestions. Luiz Almeida provided excellent research assistance. All remaining errors are the authors’ own.
China and Africa have developed close economic ties over the past 20 years. China’s rapid growth has boosted its demand for raw materials, many of which come from Africa, and trade has risen more than 40-fold over the period. More recently, the growing strength of Chinese enterprises has also led to rapid expansion of Chinese direct investment in Africa. At the same time, China’s competitive manufacturing has provided consumer goods that were previously out of reach to low-income households across the continent.
But now China’s growth is slowing and the drivers of its growth are shifting from investment and exports to domestic consumption. This shift is affecting the global economy (see the IMF’s October 2016 World Economic Outlook) but is having a particularly large impact on commodity exporters, many of which are in Africa. Overall, Africa’s commodities exports have fallen as a result of the decline in Chinese demand and the precipitous fall in world commodity prices, putting pressure on the fiscal and external accounts of many African countries. After expanding by 5–6 percent over the past two decades, economic growth in sub-Saharan Africa is expected to reach barely 1.5 percent in 2016.
How does China’s new growth model affect sub-Saharan Africa? To address this question, this paper is structured as follows: It first looks at the growing ties between China and Africa; it then attempts to estimate more precisely the impact on growth through the trade channel, since trade dominates the economic ties between China and Africa. Finally, it draws some policy implications and the discussion reflects on whether this means an end of the Africa Rising narrative or merely the beginning of a new chapter.