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The Impact of Rising Chinese Trade and Development Assistance in West Africa

AGRICULTURAL PRODUCTS AGRICULTURE AVERAGE TARIFF BILATERAL TRADE BUSINESS CLIMATE BUSINESS ENVIRONMENT CAPITAL ASSETS CAPITAL GOODS COMMODITIES COMMODITY COMMODITY PRICES COMPARATIVE ADVANTAGE COMPARATIVE ADVANTAGES COMPARATIVE DISADVANTAGE COMPETITIVENESS CONNECTIVITY CONSUMER DEMAND CONSUMER GOODS CONSUMERS COUNTRY MARKETS COUNTRY TO COUNTRY CREDIT LINE CREDIT LINES DEVELOPING COUNTRIES DEVELOPMENT ASSISTANCE DEVELOPMENT BANK DEVELOPMENT FINANCE DEVELOPMENT POLICIES DOMESTIC MARKET DOMESTIC MARKETS DOMESTIC PRODUCERS DURABLE DURABLE GOODS ECONOMIC COOPERATION ECONOMIC DEVELOPMENT ECONOMIC RESEARCH ECONOMIES OF SCALE EQUIPMENT EXPORT CREDITS EXPORT DIVERSIFICATION EXPORT GROWTH EXPORT MARKET EXPORT OPPORTUNITIES EXPORT PRICE EXPORT SECTORS EXPORT SUPPLY EXPORTERS EXPORTS EXPOSURE FINAL GOODS FINANCIAL FLOWS FOREIGN DIRECT INVESTMENT FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN MARKETS GDP GLOBAL ECONOMY GLOBAL EXPORTS GLOBAL MARKETS GROSS DOMESTIC PRODUCT GROWTH RATE GROWTH RATES HUMAN CAPITAL IMPORT BANK IMPORT MARKETS IMPORT PRICE IMPORT PRICES IMPORT PRODUCTS IMPORT TARIFFS INFRASTRUCTURE PROJECTS INTERMEDIATE INPUTS INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRADE STATISTICS INVESTING INVESTMENT OPPORTUNITIES INVESTMENT STRATEGY JOB CREATION JOINT VENTURES LEGAL SYSTEMS LOAN MACROECONOMIC GROWTH MACROECONOMIC STABILITY MARKET STRUCTURES MONETARY FUND NATURAL RESOURCE NATURAL RESOURCES NET EXPORTER OIL IMPORTS OUTPUT OUTSOURCING PORTFOLIO PRICE FLUCTUATIONS PRIVATE INVESTMENT PRODUCTIVITY GROWTH RAPID ECONOMIC GROWTH RAPID EXPANSION REGIONAL INTEGRATION REGIONAL TRADE REGIONAL TRADE AGREEMENTS SHARE OF WORLD TRADE SPECIALIZATION TARIFF RATES TECHNICAL COOPERATION TECHNOLOGY TRANSFER TRADE BALANCE TRADE BARRIERS TRADE CLASSIFICATION TRADE DATA TRADE DEFICIT TRADE DEFICITS TRADE EXPANSION TRADE FACILITATION TRADE FLOWS TRADE IMBALANCE TRADE INTEGRATION TRADE INTENSITY TRADE LOGISTICS TRADE POLICY TRADE RELATIONS TRADE RESTRICTIONS TRADE SURPLUS TRADING TRADING BLOCS TRANSACTION TRANSACTION COSTS TRANSFER OF TECHNOLOGY TRANSPORT COSTS VALUE OF TRADE VOLATILITY WORLD MARKETS WORLD TRADE WORLD TRADE ORGANIZATION
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World Bank, Washington, DC
Africa
2014-07-21T21:44:11Z | 2014-07-21T21:44:11Z | 2014-05-23

The rapid economic rise of China over the last twenty years has sustained high global demand and prices for primary commodities such as oil and minerals, greatly benefitting Sub-Saharan (SSA) African countries. China now represents more than 20 percent of SSA's trade, up from just 2.3 percent in 1985. West Africa's share in China's trade is still quite low, 0.6 percent in 2012, but it is rising rapidly. Exports to China - oil, iron, phosphates, gold, cotton, cocoa and cashew nuts, have grown fast. However, they have not grown as rapidly as imports, resulting in a large trade deficit with China (13 percent of West Africa's GDP over 2009-2012). Reasons include a strong consumption demand for inexpensive Chinese products as well as the import-content requirements in development assistance agreements. Looking at the impact of China on West Africa, it appears that West African producers do not compete with China on third markets; by and large their products are complementary. However, West African producers are finding difficult to compete with China in their own domestic as well as in regional markets. The paper's main messages are as follows: Chinese demand for primary commodities is likely to continue in the near future, potentially benefitting West Africa. To maximize these benefits, West African countries need to maintain macroeconomic stability and to design appropriate policies to manage the volatility of commodity prices while raising the competitiveness of the economy. The current stagnation of the agricultural and manufacturing sectors in many West African countries is a sign of Dutch disease effects that should not be underestimated and need to be readdressed; and while the specific reforms needed vary from country to country, they should be comprehensive enough to generate a shift in the policy stance aimed at increasing productivity and encouraging diversification in the tradable sector. Examples of such reforms include the removal of trade restrictions among West African countries, the dismantling of formal and informal trade barriers to regional processing activities and the improvement of trade logistics.

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