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China and Southern Africa: A Balanced Scorecard?. Peter Draper Research Fellow Development through Trade Project. OVERVIEW. Contrasting fortunes Positive entries Negative entries Assessment. 1. Contrasting fortunes. China Rapidly rising, modernising global power
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China and Southern Africa: A Balanced Scorecard? Peter Draper Research Fellow Development through Trade Project The South African Institute of International Affairs “South Africa’s window on the world”
OVERVIEW • Contrasting fortunes • Positive entries • Negative entries • Assessment The South African Institute of International Affairs “South Africa’s window on the world”
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 The South African Institute of International Affairs “South Africa’s window on the world”
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 sector’s 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? The South African Institute of International Affairs “South Africa’s window on the world”
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 The South African Institute of International Affairs “South Africa’s window on the world”
4. Assessment • China’s 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 The South African Institute of International Affairs “South Africa’s window on the world”
