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THE RISE OF CHINA AND THE CHALLENGE TO DEVELOPMENT STRATEGY IN SSA

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

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THE RISE OF CHINA AND THE CHALLENGE TO DEVELOPMENT STRATEGY IN SSA

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  1. THE RISE OF CHINA AND THE CHALLENGE TO DEVELOPMENT STRATEGY IN SSA Raphael Kaplinsky, Dept of Policy and Practice, The Open University, UK

  2. 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

  3. China’s growth is not unique..

  4. Special Issue World Development, Vol. 36, No. 2, February 2008http://asiandrivers.open.ac.uk/

  5. A taxonomy for assessing the impact of Asian Drivers on other economies

  6. The impacts may be competitive or complementary

  7. And they may be direct or indirect

  8. We know much more about the direct impacts

  9. From the rich country perspective, we tend to focus on the competitive effects

  10. But in SSA, the complementary impacts are often much more visible

  11. The drive to industrialisation • Close association between incomes and industrialisation • The terms of trade favour manufactures

  12. Commodities-manufactures terms of trade

  13. 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

  14. The orthodoxy Manufacturing exports are key: • Competitive effects • Scale effects • Learning effects

  15. Share of manufacturing value added

  16. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

  17. EU Imports from China Source: Euratex data as reported by Nathan Associates

  18. Caught between a rock and a hard place Percentage of sectors with negative price trends, 1988/9-2000/2001 by technological intensity and country-grouping

  19. Actual and projected global share of China’s consumption of base metals Source: Macquarie Mining

  20. Source: Macquarie Mining

  21. Enormous demand potential

  22. The agricultural sector, 2007-2016(OECD/FAO, 2007) • Biofuels raise grain prices • Raised demand in China for: • Beef • Pigmeat • Milk powder • Oilseeds for cattle

  23. “…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)

  24. SSA’s Recent Experience with growth, industrialisation and exports

  25. Share of Manufacturing in GDP

  26. Composition of SSA exports

  27. Broad and narrow manufactures Narrow manufactures are total manufactures minus • diamonds • precious stones • re-exports • oil and gas by-products • uranium

  28. SSA Manufactured exports excl SA ($mn)

  29. Share of SSA (excl SA) manufactured exports (%)

  30. Technological Intensity of SSA’s trade: Share of exports comprising different categories of products, 2005 (%).

  31. 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 Clothing footwear SSA LOSS SSA GAIN Most SSA SSA IMPORTS

  32. 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?

  33. 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

  34. 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

  35. 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

  36. 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?

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