The growing relationship between China and Sub Saharan Africa: Macroeconomic trade, investment and aid links. Ali Zafar. 1. Trade flows both direct and indirect. 2. Foreign direct investment. 3. Aid flows.

Trade between China and SSA taken from IMF SSA exports to China 0.3%2.3%3.9%8.8%9.5%11.3% SSA imports from China 1.1%2.3%3.9%6.0%6.6%8.1%

African imports from China

Africa’s exports to China.

Employment decline in clothing sector Kaplinsky and Morris % decline Kenya34,61431, Lesotho50,21735, S.Africa98,00086, Swaziland32,00014,

The impact of China on a country’s terms of trade is a direct function of five key variables. 1. The commodity composition of the country’s trade. 2. the importance of textiles. 3. The relationship between world supply and demand for the commodity. 4. The dependence on imported oil. 5. Percentage increase in world demand accounted specifically by China.

Foreign direct investment. “we like Chinese investment because we have one meeting, we discuss what they want to do, and then they just do it…there is no benchmarks or preconditions.” Sahr Johnny, Sierra Leone ambassador to Beijing. 2005

Summary of Africa and China economic relation. Jian-Ye Wang IMF Total trade: 55.5 African exports 28.8 African imports FDI and debt relief: Debt relief 1.3 Foreign direct investment 0.9

Ali Zafar concludes: Positive : accelerate economic growth by increasing commodity prices of oil and metals. Deepened trade with marginalized countries, investing in infrastructure. Low cost consumer goods. Chinas increasing aid to Africa has created more competition in the aid market.

Negatives: Chinese investment in Africa will be based on capital intensive natural resource extraction, not contribute to local employment. Chinas influence on the price of natural resources has a detrimental effect on African nations who are oil importers. The supply shock from China of manufactured consumer goods, particularly textiles, will hinder diversification and lead to deindustrialization.