INTRODUCTION

1. INTRODUCTION

For China, the world's 7th largest and most populous economy, November 2001 was a momentous period when it made a giant leap into the much quested free market by becoming a member of the world trade organisation (W.T.O). Although, China had embarked on market liberalization policies since the 1970's membership into the W.T.O. was a compelling opportunity to standardise its trade principles and practices in accordance with those of other free market economies and assimilate into the new era of globalization.

The implication of this great milestone is remarkable not only for China itself, but also for the global market system. However, for Sub-Saharan Africa (SSA), the accession of China into the W.T.O. marked a new era of economic milieu, due to the fact that, conventionally, the western powers were the countries with substantial interest in trade, aid and economic partnership and, unfortunately, due to recent domestic challenges facing these western nations, or what some policy analysts would call the marginalization of Africa, the attention given to SSA has been fast declining. However, the last ten years have brought China closer to the need of African countries. As observers would note; this increasing role does single-handedly invalidate the growing marginalization of Africa by the much traditional European and American powers (Mandy, 2005).In contrast to the western powers, by offering aid with fewer preconditions, China has presented a more attractive alternative to conditional Western aid and debt cancellation together with a boom in Sino-African trade, while gaining valuable diplomatic support to defend its international interests.

It should be noted that in 2001, China was the 7th largest economy in the world, although, this status has presently changed, however it is pertinent to state that the researcher takes into account China's status when it became a W.T.O member in 2001 (See: UNCTAD, Global Investment Report 2002).

While the continuous engagement of China with SSA has continued to spawn important policy implications for growth and investment distribution, there are growing concerns about its adverse effects on key developmental areas such as manufacturing, inward foreign direct investments, production and other key sectors. In fact, it's much advertised benefits for commodity boom for African countries is ambiguous since this apparent benefit is inextricably linked with erratic exchange rates and institutional corruption. Thus, the aim of this study is to contribute to literature on the implication of China's accession into the WTO for Sub-Saharan African countries. This study assesses both its positive impacts and negative implication for trade, manufacturing and FDI, while it also explores the underlying factors behind the growing involvement of China in SSA. In order to achieve these aims; this research has identified a number objectives which will inform its scopes and direction.

Figure: 1: The Map of Sub-Saharan Africa (SSA highlighted in Red)

1.1 Research Aims and Objectives

The overarching aim of this study is to critically explore the impact of China's accession into the WTO for SSA countries and identify the specific channels through which this impact manifests.

Objectives:

  1. Identify andanalyse the specific vector channels through which the impact of China's accession into the WTO is transmitted to SSA countries.
  2. Examine the overall impact of China's accession into the WTO on Sub-Saharan SSA countries
  3. Investigate into the primary drivers of China's increasing interest in SSA
  4. Conduct a case study analysis of two SSA countries aimed at illustrating and understanding the extensive influence of China on SSA

1.2 Background

There is mounting evidence in literature to suggest that while Sub-Saharan African economies are economic winners on one hand. They are losers on the other, from Angola, to Nigeria; SSA countries have been reaping the enormous gains of commodity boom during the past ten years. In fact China's demands for these commodities have in many cases been less fulfilled and thus it's growing interest for more and more imports. Stevens and Kennan (2005) noted that economies which are endowed with natural resources demanded by China will continuously record an exponential growth in their export and consequently earn more money. While countries that produce what china produces like (apparels and garments) will see a huge decline in exports and consequently earn less money. This concept from both perspectives points to the SSA example: while on one hand, individual countries in Sub-Saharan Africa have enjoyed huge financial gains from commodity exports. On the other, these huge gains are in turn used to purchase manufactured goods from China, thus, killing the local industries and genuine small scale manufacturers. Stevens and Kennan (2006) in their further examination of the impact of China on developing economies proposed a method which was subsequently termed as the typology of “winners” and “losers” (Goldein et al, 2006). “winners” are those economies for which the number of sectors recording trade gains are associated with lower costs of imports or where higher prices for exports is greater than the number of sectors incurring losses due to increased competition from China or higher import prices resulting from higher Chinese demand for a given product. Regarding the winners, Stevens and Kennan assess the gains from trade to check whether the gains arise primarily from lower import costs, from greater export revenue, or from both; and conclude that all the SSA countries (except South Africa) gain primarily from lower import costs. Other empirical studies (see e.g. Razmi, 2006; Qureshi and Wan, 2006) have explored the phenomenon of lower import costs and interestingly, their results shows that SSA countries have indeed enjoyed importing more products from China due to the lower import costs involved and even if SSA countries do not import from China, their local industries will not be as competitive as it should be because of stiff competition from china.

Figure 2: Africa' Trade with China

Source: UN Com-trade

The chart above shows Africa's two way exports with China and the main composition of trade.

1.3 Problem Discussion

Africa's quest for a more cordial relationship with China is grounded in its depth of poverty and genuine need for foreign direct investment as an incentive to accelerate economic development and consolidate recent democratization efforts. However, the increasing interest of China in Africa is questionable and in fact has been the focus of several policy and research studies during recent years. The possibility that the biggest economy of the 21st Century will not be a democratic or western state serves to challenge conventional “international relation theories” that have emanated since the culmination of the World War II through the pre-eminence of the western economies in global affairs. China's current friendship with Africa are not traditionally restrained to the post Cold-War era, but China admits, it is more dynamic and influential to international politics and indicate a new background for South-South collaboration. China insistently advocates, that its considered affairs with African economies has stemmed from a common history and is based on bilateral understanding and fairness in a climate that ensures fair-play and mutual benefits. The EU, US and an array of important observers, voice concerns about the real objective of China in Africa. London and Washington however, considers China's new affairs with Africa as a long term obstruction to their interest and a threat to their strategic-partnership with African countries. On top of these growing opposition and concerns, there are more worries that the risk-adverse keenness of China to parley with corrupt African governments can undercut democratic reforms and conflict resolution on the continent where the west have keen interest. The questions remain, whose claims have more validity and legitimacy and how can the truth be substantiated? Should the neo-realist's proposition which is well grounded in empirical positivism be relied upon in coming to terms with the corrupt leaders of Africa? Or do we rely on the theories of the west whose well grounded postulation provides a combination of free-market experience, albeit with little self-interest. Or do we simply put forward unconventional epistemologies that will provide an expanded collection of truth possibilities about Sino-African engagement? This study theoretically explores these extant perspectives and seeks to bridge existing gaps in literature within the context of the current study.

1.4 Motivation

During the last ten years, policy observers have noted that China and Sub-Saharan Africa have become more cordial such that Beijing's interaction with Africa has significantly increased and as such spawned impressive growth in bilateral trade. This relationship has been demonstrated by the establishment of 700 Chinese firms with an investment of around £1 billion in SSA over the last ten years, (Bejing Times, 16. December, 2003). As evidence to this growing relationship, the UNCTAD investment report of 2008 shows that Chinese FDI stock in Africa has grown from under £35 million in 1990 to over £1.5 billion in 2006. This translates to 30% growth in annual trade and investment since the late 1990's between Africa and China. However, in spite of this growing and impressive development, there is consensus amongst policy makers in SSA that key sectors of the economy have been declining since the engagement of China. These sectors usually include the manufacturing, the textile industry, productive sectors and the Small business sectors (UNCTAD, 2004; ANIP, 2005). Notwithstanding the negative implications, China's engagement with SSA have been growing exponentially and by 2010, China is forecast to be the number one trading partner of SSA, ahead of the United States, France and the United Kingdom. This study therefore, seeks to examine why in spite of the adverse implication for SSA, the Sino- African relationship is still growing, in addition to the investigation of what specifically underlies China's continuous interest in Africa.

The Non-Aligned movement gave meaning to the concept of south-south cooperation as a concerted effort by developing states (often newly independent) to avoid being sucked into the dichotomy of the Cold War power struggle (Murray, 2008).

1.5 Research Questions

The research question for this study was inspired by the definition of (Rea and Parker, 2005) who defined it as a question or set of questions that can help in bringing out evidence based facts which provide answers to research problems. As they further suggest, it not only provide answers to research problems but also helps in the development process of new research ideas (Rea and Parker, 2005).

Primary Research Question

RQ1: What are the inherent economic implications of China's increasing engagement with Sub-Saharan Africa?

Secondary research questions

RQ2: What are the channels through which the impact of China's accession into the W.T.O transmits into SSA countries?

RQ3: What specific sector(s) does the Sino-African relationship play the highest positive role?

RQ4: What is the underlying factor behind the interest of China in Africa?

RQ5: Is there a significant relationship between economic development and Chinese investment in SSA countries?

1.6 Research Outline

Following the first chapter where the objectives and research problems have been rightly identified, the subsequent chapters are ordered with the following sequential arrangement.

Table 4: Chapter Mapping

Source: Researcher's Conception

Chapter 2 is the review of extant literature relating to the present investigation and conceptualization of empirical framework with an identification of theoretical support for the previously established facts. This chapter is followed by Chapter 3, which is the research methodology where the research approach, strategy and data collection methods were discussed and explained. In this section, the researcher provides an explanation for the case study approach and introduced the Complimentary-Competitive impact framework. This was followed by Chapter 4, where the case studies presented were analyzed. This chapter further considers the impact of China on SSA countries using the earlier introduced Complimentary-Competitive framework; this was followed by a critical discussion of the impact. Chapter 5 is the conclusive part where the researcher considers the implications of the result for SSA countries and the future of Sino-African relationship..

LITERATURE REVIEW

2. INTRODUCTION

Existing literature offers a reasonable amount of information about the scale and size of bilateral-trade between China and SSA. We learn for example that trade between these two regions have increased tremendously, particularlyfollowing the years after2001. Available data-records can be explored to give us more information as to what is traded and by whom. The literature, nonetheless, is ambiguous about how this bilateral trade and relationship actually affects Africa or how the impacts of FDI manifest. Which particular SSA economies benefit and in what particular sectors? Who are the winners and who are the losers? Why? It is so apparent that trade is not the only vector channel between China and SSA, and that other channels may also create positive or negative implications. The aim of this chapter is to identify and explore other vector channels through which the impact of Beijing's interaction with Sub-Saharan Africa manifests. Following this identification is a conceptual framework developed by the researcher in order to deeply understand the inherent research issues and broad problems with the Sino-African relationship.

2.1 Previous Research

The accession of china into the WTO and its rise as a great economic power-house is one of the defining events of the 21st century. Consequently, there has been a rising interest of literature studying its impact on various factors. But notwithstanding this considerable attention, there is relative dearth of systematic research on the Sino-African relationship impact especially relating to China's accession into the WTO (Geda, 2006). Notable exceptions of this trend are the IMF qualitative research of (Wang 2006) which finds that Africa's needs for trade, road and rail networks including foreign direct investment are the prominent factors drawing the continuous interest of china. Another study by World Bank (2004) examined the limitations and policy restraints for increasing Sino-African trade and investment. Since these two prominent studies, more and more studies have been investigating how China's engagement affects Africa in one way or the other. The study of Mayer and Fajarnes (2005) conducts a comprehensive analysis of the advantages that Africa can anticipate from China's increasing trade engagement and finds that, while the advantages are liable to be modest, the predilections have been considerately adapted to African export capabilities. The quantitative study of Eichengreen et al(2008) analysed the competitive issue between China and some African countries using a gravity model. Their results indicate that countries at different level of development are affected very differently. Whereas an increase in China's output positively affects the exports of high-income African countries. However, it negatively affects those of the less-developed countries in the East African region of SSA. In another study, Stevens (2005) identified possible winners and losers among African countries as China becomes more prominent in world trade; they found that while African countries are winning on one hand, they are losing on the other. Shafaeddin (2002) studied the impact of China's accession into the WTO on exports of developing countries. He found that China's accession into the WTO will increasingly give its industries a better domestic value leading to more competitive advantage over other exporters and this could be a threat to the local industries of those developing economies. In 2008 another study exploring the growing relationship between China and Africa observed that “A key factor underlying China's recent rapid expansion in Africa is Beijing's desire to gain secure access to supplies of oil, gas, and key minerals. As a late entrant to the global oil market, Africa perhaps represents the last major sources of oil reserves that are not primarily managed by major Western energy companies, and hence available for Chinese corporations to invest in, and ultimately resulting in partial control” (Besada et al, 2008). (Kaplinsky, McCormick and Morris, 2006) studied the impact in four vector areas; Aid flows, trade flows, FDI flows, technology transfer and integration. Other recent studies have also explored the specific vector areas through which the impact of China's accession into the WTO manifests on SSA using GDP growth, income distribution, governance, competition, diversification and many others. (Geda, 2006; Tull, 2006; Goldstein et al, 2006; Palley, 2003)

2.2 Assessing the Impact of China on Sub-Saharan Africa

As aforementioned, there is a growing body of evidence in literature to suggest that the Sino-African relationship is manifesting through different specific channels. Within each of these channels, it is possible for the Sino-SSA relationship to either be competitive or complementary (Geda, 2006; Kaplinsky et al, 2008). Looking at the trade channel, for instance, China may provide SSA with appropriate capital goods and cheap consumer products and SSA may in turn provide China with the commodities it requires to fuel its continued economic expansion. Both economies gain from this relationship. On the other hand, China's export of consumer goods to SSA may displace local producers leading to competitive impacts on workers and entrepreneurs in these sectors. (Kaplinsky et al, 2006)

The impact of these relationships for Africa has been both significant and positive. Growth rates have been elevated, with a positive impact on poverty alleviation. These flows provide substantial and largely untied development finance for Africa (in contrast to present conditional OECD flows). The continent may therefore present only a small part of a rapidly changing global economic structure in which China is centrally involved, but for Africa this will likely prove to be of high significance (Besada et al, 2008).

What lies behind this development are a number of factors and motivated by china's need to secure natural resources to sustain its economic boom at home. More so, there are little doubts that natural resources are at the core of China's economic interests in Africa and also China's share in the increase in global demand for some mineral resources such as aluminum, Nickel, copper and mostly oil consumption (Besada et al, 2008). This increasing development also reflects a high-level Chinese decision to contribute to South-South cooperation via mutually beneficial commercial relationships with the African continent. But at the same time, it also reflects commercial decisions made by individual Chinese enterprises (ibid). One claim that is supporting this theory is that Chinese firms have been successful in delivering comparable infrastructure projects at prices in the range of 25 percent and 50 percent less than those which other foreign investors charge (Besada et al, 2008).

In assessing the impact of China on SSA, various studies have employed several empirical measures. However, prominent amongst this is the method devised by Kaplinsky (2008) who integrated a three vector channel of this impact into one synthetic framework; called the complementary-competitive and direct-indirect impacts. As shown in the (table 1) this framework shows that complementarity and competitiveness is easily understood. By contrast the distinction between the direct and indirect impacts is less obvious, and its significance is less widely recognized. The direct impacts are relatively simple and clear. Both complementary and competitive impacts occur as a result of direct bilateral relations between China and SSA. These impacts can be measured, by charting the direct trade flows between China and SSA, breaking these down by sectors and countries, and over time. The indirect impacts occur as a result of China's relations with third countries, working their way indirectly through to SSA. Staying with the trade example, China's demand for commodities may raise their prices at a global level, and even though a country like Ethiopia does not export animal feed to China (a direct relationship), it sells animal feeds into a global market in which prices have been raised by China's growing imports (indirect impact). As we shall see below, and particularly in the case of trade, the indirect impacts of China on SSA are sometimes much more substantial than the direct impacts. However, almost all of the analysis of the impact of China on SSA focuses on direct, bilateral relations, and hence tends to miss some important issues.

Table 5: Complimentary-Competitive Framework

Source: (Kaplinsky et al, 2006)

Since this study is focusing on other vector channels as the one seen above, it might be pertinent therefore to have a specific framework in analyzing the impact China on SSA. Thus, the need for the next section

2.3 Conceptual Framework

Figure: 3 Conceptual Framework

Source: Author's conception

This conceptual model shows the four conceptualized vector channels through which the impact of china transmits on SSA. Theoretical explanation is further given in support of each of these vectors channels.

2.3 TRADECHANNEL

There is evidence to suggest that trade between China and SSA since 2001 is a small percentage of each region's total trade. However, its rapid growth suggests that the trade channel is a momentous source of impact (Kaplinsky et al, 2008). The volumes of Trade more than quintupled from over £5 billion in 2002 to over £25 billion in 2005 and more than £50 billion as at 2006 (ibid). The basis for China's rising trade links with SSA has been its particular impressive growth since its accession into the WTO. One of the main features of this growth has been its deepening trade orientation, with the trade-GDP ratio in excess of 70 percent, well above the “norm” for large countries. Within this, China has become a major exporter of manufactures and a significant importer of commodities (Zafar, 2007).

In 1990, SSA's total imports from China were less than 1.1% of its imports from industrialized economies, but by 2006, it had risen to over 8 %. In the same vein, SSA exports to China were less than 1% of its total exports to industrialized economies, but by 2006 the proportion had risen to eleven percent. However, Since 2002 after china joined the WTO, imports from China have been expanding more slowly than exports, allowing SSA's trade balance with China to turn from negative to positive ( Kaplinsky et al, 2008)

Figure 4: Sino-SSA: Balance of Trade

Source: (IMF Dots: Kaplinsky et al, 2008)

For some SSA economies, the importance of China as a direct destination of exports grew particularly rapidly. In the case of oil, for example, exports to China account for almost around 86 and 100 percent of all oil exports for Angola, Sudan, Nigeria, and Congo. A similar picture is true for the DRC, which sends 99.6 percent of its basic metal exports to China. On the import side, only seven SSA countries source a significant share of their total imports from China. Sudan, which has growing and policy-related energy links with China stands out, with 14.2 percent of its imports coming from China, followed by Ghana and Tanzania (9.1 percent), Nigeria (7.1 percent), Ethiopia and Kenya (6.4 percent) and Uganda (5.1 percent) (Jenkins and Edwards, 2005). Almost all of these imports were manufactured products. With that historic picture as background, we look forward to areas of potential bilateral trade between China and SSA.

2.4 EXPORT CHANNEL

Positive impact for SSA is sufficiently provided in the literature assessing when assessing export links between China and Sub-Saharan Africa. However, unlike this present study, most authors have assessed this vector as an indirect trade channel. Several studies has however, attempted to explore the impact of this indirect trade channel. For example, the study of (Kaplinsky and Santos-Paulino 2006) investigated the similarity between China and SSA exports (Jenkins and Edwards 2006) classified losers and winners and from exports with China, The losers are those economies which export products which China exports or import products which China imports (Stevens and Kennan (2006). All these empirical investigations have provided constructive insights into the export impacts of China's trade on SSA. Kaplinsky, McCormick and Morris (2008) noted however that, the fact is apparent that only a small amount of engagement exists between China and SSA in intermediate products thus, it appears that there exists little Sino-African integration in coordinated global value chains. More so, owing to the reason that most if not all of the previous analysis have been conducted at fairly high levels of trade aggregation they have tended to impede the severity of China's indirect trade impact on SSA exports. Thus, it is better if the real impacts are examined sectorally or through particular products (Kaplinsky, McCormick and Morris, 2008).

Table 9 Share of particular commodities in exports to China

Sources: IMF, Direction of Trade Statistics

Each of this graphs shows how China's trade has grown over the years, figure 9 shows the share of exports to China by particular natural resources while figure 10 shows how the exports of Africa has grown notably since 2001 at the inception of China into the WTO. Figure 11, shows that Sino-SSA trade, although is increasing but relatively small in the global perspective: 16% of total African exports is accounted for by china (19 percent of exports from SSA) in 2006, a proportion well less than that of the U.S.A and the E.U. The graph also shows that while U.S.A. and the E.U have persistently contributed significantly to the growth of Africa's export, China is playing a fast catch.

2.5 FDI CHANNEL

FDI is one of the notable channels through which many extant researchers have assessed the impact of China on SSA. Interestingly, this channel has proven positive for SSA from the perspective of many studies. See e.g. (Kaplinsky, McCormick and Morris, 2008; Zafar, 2007; World Bank, 2007). This is so because FDI inward into SSA has apparently increased considerably in the last 10 years since China's accession into the WTO.

According to Morris (2009):

“As China began to emerge in the international global scene, its outward FDI flows remained small; equivalent to just $916m.........In 2000, not much higher than the $830m registered in 1990. However, post 2001; FDI outflows have been rising, reaching $17.8bn in 2006. The flows are expected to continue to increase and to reach $72bn by 2011 (Morris, 2009)

According to Kaplinsky, McCormick and Morris (2008) there literally exists little FDI inflow from China into SSA before the 1990's. Then from less than £15 million per annum for Africa as a whole, FDI from China climbed to over £200 million in 2002 and reached £1 billion in 2008 (Zafar, 2007). According to UNCTAD (2007) this growth represents higher FDI inflow into SSA than anywhere in the world. More so, it is a notable FDI stock in contrast with inflows from Europe and America particularly because it has come from fully or in some measures state owned corporations who have more access to very low-cost capital, and hence can operate with much longer time-horizons.

According to UNCTAD (2007) most FDI from China usually comes in the variety of equity joint ventures with local business partners of SSA or state and national government agencies. The most recent and instances are those of the big energy and transport investment in Angola, Nigeria, Zimbabwe, Sudan and Mali amongst many. Other areas of Chinese interest driving FDI growth is the import of oil, manufacturing and investment in other local businesses. For example: China have made Investments valued at $757m in Sudanese Oil and $2.7bn in Nigerian oilfields in the past few years (Africa Frontier Advisory March, 2008)

Table 7: FDI Flows to Africa, 2002-05 and the Top five FDI spots

The World Bank (2004) observed that in spite of the usual picture of China as a resource hunger and raw material driven investor in SSA. The reality is that almost 48% of the amount invested in SSA since the 1980's till 2001 was in the productive and manufacturing sector. Slightly over (18%) of investments went into services and construction business. Agriculture (7.1%), Resource development accounts for just over one quarter of the investments, slightly over (27 %), though and other (.9%) claimed the balance. Although, this figures has slightly increased, (ibid). According to UNCTAD (2007), by 2005, china's investment had grown into 48 African nations.

Table 8: Distribution of China's Outward FDI Stock in Africa, 1990, 2005 (%)

Country

1990

Country

2005

Zaire

18

Sudan

22

Nigeria

15

Algeria

11

Mauritius

14

Zambia

10

Guinea Bissau

9

South Africa

7

Zambia

7

Nigeria

6

Gabon

6

Tanzania

4

Rwanda

6

Kenya

4

Zimbabwe

6

Madagascar

3

Egypt

4

Guinea

3

Tanzania

4

Zimbabwe

3

Madagascar

4

Others

27

Central African Republic

3

Sierra Leone

2

Libya

2

Source: UNCTAD (2007a)

Consistent with several empirical perspectives, Kaplinsky, McCormick and Morris (2008) also suggest that the increasing account of FDI into SSA is due to its involvement four major economic areas: Although, this study will be looking at only two of these areas, the first and second as they tend to have more significant impact on FDI

  1. Increasing investments in the energy and resource sectors
  2. Participation in infrastructural projects
  3. Integration to production systems globally
  4. Small scale entrepreneurial investments

2.7 Investments in the energy and resource sectors

Owing to the increasing energy quest of China to fuel its own economic growth, internationally-oriented national oil companies of China (INOCs) have been increasingly registering their interest in SSA countries. As Hodel (2008) noted: “Chinese INOCs have reacted to broader Chinese insecurity regarding access to global energy supplies by developing upstream extraction facilities, forming joint-partnerships, and securing rights to fields throughout sub-Saharan Africa. Although national security concerns factor into to these deals, Chinese INOCs also pursue their own commercial benefit by competing with each other and against the privately financed international oil companies for foreign rights and future profits”.The Chinese National Petroleum Corporation, (CNPC) the firm in charge of china's oil and gas management have been recently involved in the establishment of one of Africa's biggest Biodiesel plant in Zimbabwe. More so, China has been investing substantially in the oil industries of Nigeria, Sudan and Angola.

Source: McCormick et al, 2006)

2.8 Participation in infrastructural projects

Another significant channel through which Beijing's FDI inflow into Africa manifests is through increasing investment in infrastructural projects which range from long kilometre road networks to construction of dams, stadium, presidential palaces, markets and multi-unit housing schemes. More lately, Chinese companies have started to include food projects with their infrastructural investments; an example is the (£6 million) soya processing plant in Malawi, prawn production (£8, million), a huge shopping hub and industrial warehousing units in Malawi. This increasing involvement of china in infrastructural projects is channels through which China's FDI flows in to SSA (ANIP, 2007).

2.9MANUFACTURING CHANNEL

Although, we have identified manufacturing as one of the vector channels through which China's impact manifests on SSA since its accession into the WTO. However, In contrast to other vector channels where extensive evidence exists, there is considerable dearth of evidence to determine whether the manufacturing impact have been negative or positive. Consequently, localised data and evidence of this impact have been adopted by the researcher in unmasking the real fact about China's impact on SSA manufacturing sector. A recent evidence by the (ECA) East African Community (2009) study reveals that the degree to which substandard goods (particularly from China) have flooded almost every nook and cranny of East African countries is exerting undue pressure on local firms and leading to their immature closure. According to their examples; The Kenyan music and film industry is at the verge of collapse due to piracy, influenced by Chinese manufacturers of CD's, the same case exists for the small business in Uganda, Tanzania and other neighboring states.

According to the report: excerpts;

“Ten manufacturing firms in Burundi closed down in the past three years because of counterfeiting. Both Burundi and Zanzibar have no more indigenous manufacturing sectors left as a result of the flooding of their markets by fake products. Even multinationals are hit by the vice. Microsoft estimates that 80% of all software installations in the region are pirated, resulting in a loss of $100m annually”.

The ECA report further shows that more recently as a result of direct competition of Chinese goods, The East African business atmosphere has been swamped with a mass of fake and substandard goods, making the district becoming unappealing to potential investors and genuine firms. In addition to this, since china'sexport growth has been usually linked with lesser manufacturing prices. For most countries, as in SSA, lower prices intensify local competition but also exert undue influence on local manufacturing firms who do not have the competitive advantage as that of china. More evidence are increasingly emerging that china's engagement with Africa, is killing the manufacturing sector in various ways while the textile and apparel production sector is one of the most notable channels. In South Africa, over 400,000 textile workers have lost their jobs since the last four years due to influx of Chinese manufactured textiles which are often cheaper and more accessible.

2.10THEORETICAL FRAMEWORK

Several theories have been employed in the literature assessing China's impact on SSA. The post positivist theory holds that whatever phenomena that we currently experience is the goal of the knowledge that is held, therefore pointing to the possible fact that the current impact of China on SSA whether negative or positive is what it is meant to be because it is what we can measure (Werner and Trefler, 1999). The Eclectic theory postulates that for FDI to take place, three factors must be present; firm-specific advantages, internalisation advantages and location-specific advantages. Therefore pointing to some perspectives that china's involvement in SSA is driven by the advantages it derives, such as oil and natural resources, and also driven by the investment needs of SSA including its specific advantage of natural resources. This theory suggests that the absence of any one of these will prevent FDI from taking place, but since FDI takes place in many SSA countries it can possibly be argued that this exception does not apply to SSA since all this factors are present. The core and periphery theory believes that there are two different types of states- the 'core' and the 'periphery.' The former includes main world powers and the countries that make-up much of universal planet. The latter are those nations that are not getting the advantages of globalization and global development. This theory suggests that as prosperity increases globally, the bulk of its advantage is harvested by a 'core' region of affluent nations in spite of their smaller relative population to those in the 'periphery' state. This theory again shows that China possibly harvests the bulk of its relationship with SSA being the core and SSA being the periphery. The Neoclassical theory, by its own distinction, considers the process of trade as a path to increasing growth for the economies involved, which also means that the consequential economic growth is beneficial for everyone (Pareto optimal) even if the advantages are not constantly shared equally. While it is true that trade can generate a positive boost in wealth in a world of global capital, wealth gain is in no way automatically distributed evenly between trading partners. In opposition to the neoclassical and neoliberal theories, the Marxist philosophy postulates that, capitalism the main offspring of neoclassical theory is essentially conflicting in its creation of two principal classes—the capitalists who own the means of production and the grassroots who must offer their skills or labour to live. Thus, the Marxist theory believes that increase in wealth in one point is intrinsically a simultaneous accumulation of misery at the opposite point. Therefore, one could rely on the Marxist believe that within the two economies under study, china enjoys much of the wealth on one pole while Africa suffers the misery at the other pole. Following the Marxist thought is the dependency theory which has been extended into the field of international trade and development by dependency theorists. The premise of dependency theory is that the interdependent relations between two or more economies take the form of dependence when some countries (i.e., dominant nations) can expand and be self-sustaining while other (dependent) countries can do so only as a reflection of this expansion, which may affect their immediate development either positively or negatively (Dos Santos, 1970). According to Milo's (2007) development and underdevelopment represent the two differing poles of one and the same process: development of some nations (i.e., the imperialist countries) assumes, or even triggers, the underdevelopment of the dependent economies which are under the subject of imperialist operation through international trade (Jean-Claude 2007). Most predominantly, given that many developing countries currently do not have inter-country market-place, their nations rests mostly on the economies of better societies, which in turn gives the better economies more control over the relatively disadvantaged ones. Another precept of dependency theory, proven by the Prebisch-Singer hypothesis, claims the constant decline in the net trade conditions of business between manufacturing and principal goods is based on the supposition that the comparative price between primary products to manufactured products should drop in the long-run (Singer, 1950; Prebisch, 1950;). With respect to the above, Vernengo (2004) suggests that at the core of the dependency link between the centre and periphery is the incapability of the latter to emerge with a self-governing and vibrant development of scientific ad technological novelty. Consequently, centre nations manage and direct technology and the schemes for producing it, once more putting technology at centre stage. Unfortunately FDI's cannot resolve this dilemma, since it results only to partial diffusion of technology and not to the practice of innovation itself.

2.11CHAPTER SUMMARY

This chapter has reviewed extant literature on the possible channels through which the impact of China's accession into the WTO transmits into SSA. Following the lessons from literature, the author built a conceptual framework which was inspired by the broad ‘knowledge and perspectives earlier reviewed. The principle and raison d' etre, underlying each of the vectors in the conceptual framework was explained with appropriate justifications from literature, following this was a brief highlight from theoretical perspectives in order to hypothetically support the arguments earlier made throughout of the review.

METHODOLOGY

3. INTRODUCTION

Having set forth a concrete review of empirical literature, it is imperative to discuss the adopted methodology in assessing China's impact on SSA, as well as justify the research approach, strategy and data collection methods that have been rightly employed. As has been noted by several prior studies, one of the limitations in understanding the impact of china on SSA is because of the fact that there exists very little systematic and specific case studies looking at the individual impact of China on specific sectors and countries. Thus, in response to this limitation, this study employs a systematic case study approach in addition to the complementary-competitive.

3.1 Research Purpose

There are several purposes for conducting a research. According to Yin (1994) these purposes can be divided into three common patterns: Namely, explanatory, descriptive and exploratory. According to Yin, an exploratory research is the context where the researcher confronts a novel subject in which modest or no sufficient research has been exists and when it is difficult to clearly give account of the research problems. An explanatory research on the other hand is performed by giving response to research questions using existing theoretical understanding. The Descriptive research examines the main grounds of a phenomenon or particular nature of an experience exactly as they originally emerged, Bolton, Kannan & Bramlett (2000). They explain existing relationship and what factors underlie a particular experience, Zikmund (1994), this study follows the descriptive purpose since the aim is to examine how China affects Africa and describe the underlying factors.

3.2 Research Approach

A research approach is the design of the research where the researcher objectively states the modes and techniques that will be adopted during the research process (Mackay and Thiele, 2001). There are two major approaches that can be objectively employed in research, (1) quantitative approach also well-known as (deductive approach) and (2) qualitative approach also called to the (inductive approach) (Mouton and Marais, 1992; Mackay and Thiele, 2001). The quantitative approach is more suitably linked with statistical analysis, scientific investigation or mathematical calculations to explain the justification of changes or behaviours in social experience (Ary, Jacobs & Razavieh, 1996). The qualitative method is premised towards the realization of better knowledge of the main issues that is within the case setting. In contrast to the former, the qualitative approach provides an extensive description of events as it occurs at the particular time, it endeavours to be a non-controlling method of the groups' behaviours. The initial phase of the approach is to provide explanation of its suitability for the exploration of an event and also to organize the research around the logical and theoretical perspectives (Creswell (1999). This study therefore follows the qualitative method since we are more concerned with understanding the deep phenomena of the issue under investigation i.e. the Sino-African relationship

3.3 Research Strategy

Following the identification of an approach to employ for this study, it is necessary to define the strategy that will be used to compliment the approach, thus, the adoption of the case study research. The case study research approach focuses on studying the dynamics occurring within given settings.” According to Yin (2003) case study research is usually of a qualitative nature where a specified number of cases involving, be it, events, teams, organizations, or others incidents are intensively investigated typically through interviews and/or observations, in order to broadly explore the qualitative nature of a given settings. Yin, also suggest that a case study can either study single or multiple, it can also be considered in a longitudinal setting to discover and illustrate changes within cases in the course of time or in a comparative setting to discover and explain differences between cases. The present research has adopted a multiple case study in a longitudinal pattern, since the aim is to describe the changes in SSA over time since its relationship with china using two different countries as case study.

Table 9: Advantage and disadvantages of single and multiple case studies

According to Eisenhardt (1989) several cases are helpful for theory building using multiple case study research. However, both types of case designs can be implemented with exploratory or descriptive approach. Where descriptive research is adopted, a multiple case may provide the underlying explanations of why an experience occurs, and these may then be further investigated by relating them to additional cases in other situations. A multiple case design has limitations which although can be moderated by exploring multiple cases well enough. However, most often it does not have depth and generalizability; it may also be partial depending on the case explored (Voss et al, 2002). In addition to the case study research, this study also adopts the competitive-complimentary framework which predominantly serves as the method of as analysis. According to the proponents of the framework, within each of these channels is the possibility of either complementary or competitive impact or both. This method was recently used by Kaplinsky and colleagues in 2006, to assess the impact of China on SSA. They suggest that in the case of the trade channel, for instance, China may offer SSA sufficient capital products and low-priced goods, while SSA may present China with the natural resources it requires to fuel its continued socio-economic development. In this way, the two regions benefit from this connection. However, contrarily, consumer goods export from china may dislodge local manufacturer, thus resulting in competitive impacts. By adopting this method, the researcher determines the impact of China on SSA since its accession into the WTO, by identifying the particular impact of china as to whether it is competitive or complimentary.

3.4Data Collection

Both the primary and secondary data methods were adopted for this study, the primary data collection include content analysis of newspaper and abstract from previous interviews, Primarily a content analysis of newspapers from the two chosen SSA countries were obtained from newspaper archives online while 6 different interviews were conducted with members of the investment association of the two countries under study. The countries chosen for this study were South Africa and Angola because since, 2007, Angola particularly accounts for approximately 25% of total two-way trade between SSA and China. More so, Angola was China's largest trading partner in the entire African region accounting for about 21 percent of trade since 2006. South Africa was the second largest trading partner between 2006 and 2008, accounting for 18% in 2006 and 16% in 2008. Therefore choosing this two countries as examples has some promising potential to let the reader and the researcher understand how China's influence manifests on Africa.

Semi Structured Interviews:

The interview conducted was semi structured and followed the outline method of Mouton and Morrais (1992) See figure: 14 below

The interview was designed to ask questions about each country's relationship with China and how it is believed to have affected trade, manufacturing, FDI and production sectors since 2001. Two interviews were conducted all in all with the commercial attaché of the diplomatic representatives of each country (embassies) in the UK. Some of the interviews were conducted by telephones while the rest were conducted one on one with the appropriate members of staff in the commercial sections. The researcher recorded all the interview data using her blackberry recorder which was later transcribed into a transcript verbatim. The interview data as well as other data collected from several sources such as the Angolan Investment authority and the South African Chambers of commerce served as the main data source.

Table 10:RelevantSituationsforDifferentResearchStrategies

SOURCE:Yin(2003)

3.5 Secondary Method

Following the primary data collection, was a secondary technique used in gathering relevant data concerning the present research. Secondary sources include the world Investment survey 2009-2011 by the United Nations for Conference Trade and Development (UNCTAD), the World Bank development indicators (WDI) were also used while current Sino-Africa journals, including IMF statistics were adopted, to support these sources, data were also mined from existing Sino-African websites and previous academic case studies. The researcher also relied on secondary sources from the two chambers of commerce of the countries under study.

3.6 Alternative Research Strategies

Apart from the adopted case study technique, there are several methods in literature which can be adopted to study the impact o China on SSA. Various authors have used these approaches in studies concerning China and Africa including the rest of the world. Some of these models include the “Gravity Mode or the econometric approach” which models the determinants of bilateral trade between trading partners, it has been used by Eichengreen et al (2004) in their study of the impact of China and its Asian neighbours by supplementing the gravity model using the impact of the Chinese trade as additional regressor. Another very popular approach which could have been used is the GTAP model (Global Trade Analysis Project). Which is specifically used to assess the impact of China's accession into WTO for other economies, it has been used by several authors and a predominant method used in UNCTAD studies. In addition several authors have used the Flying Geese Model (FGM) which predicts that countries specialize in the export of products in which they have a comparative advantage commensurate with their level of development and at the same time seek to upgrade their industrial structures through augmenting their endowment of capital and technological capabilities (Kwan, 2002). The limitation to these approaches is that they would limit our understanding of the main issues which are being investigated in this present study, hence; reduce its validity and reliability including the generalizability. In contrast to the case study approach which gives depth and insight into the underlying factors, drivers and scopes of the research.

3.7 Chapter Summary

This chapter has indentified and discussed the strategies and approach that has been adopted in providing answer to the current research questions. It has provided a rationale for the methods employed and explained the data collection techniques. As aforementioned, it has adopted the direct and indirect method of Kaplinsky to determine the implication of china's relationship with SSA. The following chapter deeply explains the nature of this impact and China's overall implication for the economies of SSA countries.

CASE STUDY, FINDINGS AND DISCUSSION

4: INTRODUCTION

As established in the preceding chapter, this study uses the complimentary-competitive impact framework to assess the impact of china on SSA. This was achieved using the case study of Angola and South Africa as a representative of SSA countries. Consequently, this chapter evaluates the individual cases of each of these two countries in terms of their trade and FDI to and from China and then subsequently discusses the competitive-complimentary impact. It is imperative to state at this juncture that, this chapter was guided by the research questions and the conceptual framework of the preceding chapter.

4.1 Trade, Exports, FDI and Manufacturing

4.2 The Case of Angola and South Africa.

According to several recent findings (highlighted the preceding chapter) chief of the limitation towards the critical understanding of the impact of China on Africa is that of the lack of existence of systematic research on specific African examples that can then be generalized towards understanding the underlying issues; (see e.g. Kaplinsky et al, 2006, UNCTAD, 2007). Thus, the case study in this research in some ways bridge research gap, but most importantly, gives the reader a better understanding of the real background of the Sino-African relationship and Impact using the specific knowledge gained from individual countries.

4.3Sino- Angola:Bilateral Trade and Exports

Trade between the two countries, Angola and China has grown tremendously in recent years. (See Figure 15) this sharp increase has particularly been remarkable since the periods following 2001. According to the Angola Investment Authority, in the 1990's, bilateral trade between both countries was around USD$150 m to $700 m on average. In 2000, trade surpassed USD$1.8 billion, and by 2005, it increased significantly-almost four-times to USD$6.9 billion. By 2007, this figure doubled to over USD$12 billion, making Angola the biggest partner of china in not just Sub-Saharan Africa but the entire African continent. Crude oil accounts over 95% of all the exports of Angola and constitutes the chief import of china from Angola. Since 2002, the period following accession of China into the W.T.O, China became the second-largest importer of oil from Angola behind the United States which has been a major importer since the early 80's, accounting for over 30% in total of Angola's oil exports which reached USD$3.9 billion in 2004. Also by 2006, Angola temporarily went ahead Saudi Arabia as the largest supplier of crude oil to China, with slightly over 23.45 million tons of crude exported in the same year. On the other hand, Oil imports from Angola now constitute over 18 percent of China's total oil imports and this ratio is growing. In the same vein, Chinese exports to Angola have also seen a momentous raise. In 2004, China became the fourth-largest trading partner of Angola, up from being its seventh-largest trading partner the year before in 2006. According to the Angolan Investment Co-operation;

“China is a very important trading partner for us and we hope to continue building this relationship, our main challenge is to diversify our exports to china, so instead of mainly oil, we want to export some agricultural products and locally manufactured goods”

In spite of the increase in the value of both imports and exports in the periods analyzed above, Angola has constantly run a large trade surplus with China, mainly as a result of the rapidly rising rate of Chinese imports of oil and gas.

4.4 Foreign Direct Investment Inward

On top of trade, the FDI of china into Angola has increased considerably, although, the largest Chinese operations in Angola are concentrated in construction and oil exploration, there has also been a spectacular rise in non-oil Chinese FDI to Angola by and large (see figure 12)

Apart from bilateral trade, another factor behind the increasing FDI of china into Angola is aid and financial assistance through loan and grants from the Beijing to contribute to Angola's economic development. An example of this was highlighted by (ANIP), in 2005, China International Fund Ltd. (CIF), extended $2.9 billion to Angola to support its postwar renewal era. This financial facility is administered by Angola's Reconstruction Office, which is exclusively accountable to the Angolan presidency.

As noted by Guo Zhen Fu, president of Nissan Motor Company in China; recent economic stability in Angola has reduced business risks and removed the previous fears nurtured by Chinese government and investors in dealing with Angola. The government of Angolan has also given confidence to private-sector expansionall the way through a new-fangled investment law that offers samehandlingand business consideration to local and foreign businesses, in addition to a new commercial code, and a land tenure sstem with the aim of clarifying property rights and customary tenure. Between the periods of 2005 to 2007, about 50 different projects, with the value estimated at over $73 million were also permitted by ANIP. This is a momentous rise from the 1990's when FDI increased from $0.5 million to about $1 million; which is still relatively small when compared to other players such as Portugal and South Africa. Nonetheless, FDI to Angola from china is still envisaged to increase in the coming years as new collaboration agreements are signed by the two partners to draw potential investors, creating credible legal protection and stability to their investment.

4.5 The Angolan Manufacturing Industry

Majority of the evidence previously reviewed has shown that oil is the main composition of Angola's export to china; however, there has been less evidence to show the major composition of china's export into Angola. According to ANIP however, “the imports from china into Angola is much composed of apparels, clothing's, home materials and general manufactured goods.” Although,there exist a quota of the amount of finished products that the Chinese can export into Angola, however, an excess of this quota is often smuggled through the numerous bush routes along the Angolan border with other African countries. As one importer stated: ''We get disturbed by the customs because importations of some products especially from china are contra-ban goods but we always figure our way out because they are cheaper than locally made goods.” Tamba Sambue, (Angola Times, November, 2007). Although, Angola has its own local challenges with manufacturing, but imports from china particularly, has led to the shutting down of over 40 local textile mills and the redundancy of more than 80,000 workers in the textile industry over the past six years, according to Ruhe Sinbulu, a Textile company manager in Angola. “Literally over 1 million people whose professions are connected to the textile industry, such as cotton traders, and farmers have lost their means of survival owing to the increasing closure of Angolan textile firms.”

This notable effect on the Angolan local industry perhaps results from competition by the Foreign Chinese firms. The only limitation in understanding this effect however is that there is no sufficient evidence to lay claim to how much the manufacturing industry have been affected, the only known effect is that Chinese imports are creating undue competition for local Angolan firms, thus increasingly forcing them out of business.

4.6The Sino-South African Case

4.7 Bilateral Trade and Exports

The Sino-South African engagement has emerged fast since its inception in the early 1990's when the two economies commenced direct commercial trade relationship. Bilateral trade volume was estimated at US$14 million 1991 and in 1997 over US$1. 5billion. since the accession of China into the W.T.O in 2001, more diplomatic ties have been established between the both countries, making trade rise to over US$2. 58. billion as at 2002. Of this total, China's imports amounted to approximately, US$1.269 billion and exports US$1.311 billion. For the first half of 2008, the bilateral trade volume reached US$1.67 billion. As at the end of 2002, Chinese firms had invested over US$160 million in real terms in about 97 capital projects in various industries like, textiles, agriculture, mining plus banking and telecommunications in South Africa, while South African enterprises had invested in 206 projects in China. According to one of the respondents who was interviewed:

“South Africa has profoundly benefited from China immensely and china has equally benefited from china in so many ways, the only challenge is to balance this benefits so that, we don't in some ways, re-modernise the era of Neo-economic apartheid”.

The two countries have signed a series of government agreements on protection of investments, trade, economic and technical cooperation, avoidance of double taxation, civil air transport, maritime transport and etc. With the Sectoral Committee on Economy and Trade under the Bi-National Commission serving as a contact channel, the government departments of the two countries in charge of economic cooperation and trade have stayed in close consultations on matters concerning China-South Africa cooperation in WTO, protection of intellectual property rights and the New Partnership for Africa's Development as well as specific issues relating to the bilateral economic cooperation and trade.

4.8 Inward FDI

On the FDI front, South Africa is perhaps the second largest receivers of Chinese FDI in SSA after Angola. According to UNCTAD (2002) South Africa recorded FDI inflows of $9billion during 2008, a substantial increase on the 2007 figure of $5; 7-billion. Although the table below shows that Sudan and Nigeria with the exception of Algeria which is not a SSA country, received more FDI than South Africa since 2003, the FDI in the case of these two countries have been driven predominantly by oil exports to China. FDI in the case of South Africa however, is truly reflective of consumer products, mixed with commodity exports.

Table: 13: African countries receiving Chinese FDI.

In the case of Sino-South-African relationship, since South Africa exports as much goods to China leaving a small trade balance between China and South African trade; it can be argued that the impact of china on South Africa is complimentary and not competitive more so because the types of goods exported into South Africa by china differs from the particular types of products which South Africa locally manufactures, although an exception is that of textile and apparel...where the South-African relationship is increasing proofing negative, the impact of China have even been more felt by South Africa over the past 10 years since the textile export of china have grown by over 40%, S.S.C.C (2010)

4.9 The South African Manufacturing Industry

As at 1995, the apparel and textile industry had actual sales figures around $2 billion, representing 7% of total GDP. The apparel industry employs approximately 170,000 directly and an additional 200,000 indirectly. Equally, in 1995, South Africa imported approximately $103 million of apparels and exported approximately $123 million worth of apparel products, showing a trade surplus of over $20 million with an expanding local production of textile that was rated number one in the entire SSA region. While this growth has tremendously driven the entire manufacturing industry, South Africa is not an exception from other SSA countries which the undue competition of Chinese firms affects. In fact, its manufacturing (especially textile) appears to be one of the worst affected sectors. Evidence shows that there has been a drastic decline in employment in the textile and apparel industry over the past 8 years. While imports of clothing and other textile materials have dramatically increased. (See Figure 19 which shows the imports of clothing and textiles within the quota lines from China and the World respectively) it is also clear that the increase in South African imports of these clothing and textile materials were almost entirely driven by imports from China up till the end of 2006.

According to recent reports by the World Bank (2007) South Africa is one of the countries whose production and manufacturing sectors have been considerably affected by China's competition. The South African Investment Corporation also suggests that:

“Compared to the mid and late 1990's when we use to have a very strong manufacturing of textile industry and more exports, currently, in this year...(2010), we have received more textile imports from China than we have exported to China, therefore our local industries have been affected so much that job losses and closures are a daily occurrence in the clothe and textile manufacturing of our country...(South Africa)”

To support this statement, the South African Chamber of commerce also state that:

“In the last 7-10 years there has been a remarkable decline in South Africa's textile industry and with a conservative figure, we have lost over 35 billion US dollars, if one is to account for the losses in jobs and small businesses, this translates to nearly $1. Billion every year”

As an attestation to its growing decline, the global investment report by IMF (2007) suggests that with the present trend, South Africa may completely lose its textile industry to imports from China by 2015. However, it is noteworthy that most of the negative changes in the textile and other production industry of South Africa began post 2001, therefore, pointing to some facts which needs to be discussed.

4.10 Complimentary-Competitive Impacts

Following the preceding section where the cases of both Angola and South Africa have been presented and linked with the conceptual framework developed by the research in past chapters, the aim of this particular section considers whether the impact of these channels are complimentary or competitive on the SSA countries investigated. To remind the reader, this framework simply shows each vector channel conceptualized and how it impacts each country being explored.

Table 14: The Complementary-Competitive impacts

Channels

Impact

Nature of links

Trade

Exports

FDI

Manufacturing

Complimentary

Exposure to large market and new source of finance

Import of cheaper consumer goods

Competitive

Displaces local businesses and entrepreneurs

Complimentary

Utilization and Maximization of natural resources

Export of commodities

competitive

Chinese products are excessively flooding the market

Complimentary

Foreign investment inflow to fund local budgets

Competitive

Complimentary

Chinese firms are increasingly becoming part of the

Local manufacturers

Competitive

Local production of goods including textile and

Apparels are being driven to extinction

Chinese manufactured goods have spawned undue

competition

4.11 Discussion of Impacts

Table 14 above shows the complimentary-competitive impact of China on the two countries investigated (South Africa and Angola), for each vector channel, it can be seen that the impact has both a complimentary and competitive impact except for FDI where the impact remains only competitive. For trade, it would be noted that in the previous chapter we highlighted how the bilateral trade of most SSA countries have grown in significant measures. With our comparison with the 1990's it was learnt that the real trade of SSA countries with China had only really started in the years after 2001 when it became a W.T.O. member. However, for SSA countries, this trade relationship with China has not only spawned a new business era for the much aligned continent by the west, It has offered SSA an exposure to China's over 1 billion population which is increasing and an hungry market for Africa's resources. In addition to this advantage, bilateral trade provides a new source of finance, but without attempting to generalize these impacts, it is relevant to state that we are only considering the impact of China in this discussion section on Angola and South Africa. The following chapter will look at how these impacts generally affect SSA. On the other hand however, categorization of impacts in table 14 shows that while trade is advantageous to Angola and South Africa, it is detrimental on the other hand considering that within these trade, their export is not well diversified as in the exports of china into Africa, taking the particular case of Angola for example; it was shown in the case study that 95% of its trade is based on one single product which is natural resource, but in the case of china, the goods exported into Angola is so much diversified, from mineral water to tooth pick and textiles, therefore, exerting a competitive force on the local industries. This force is more exerted by china's offering its own goods at cheaper prices: to buttress this point it was shown from data collected the prices of locally made products when compared with the one imported from china. The Chinese product has a due advantage because it is offered well in the prices that local products cannot match.

Apart from trade, considering other vector impacts in the complimentary-competitive framework, the results surprisingly the same, for example; looking at the exports channel, we can see that apart from a complimentary impact there is also a competitive impact, the same applies to manufacturing where the competitive impact is in fact forceful the most. Except for FDI where the impact is only complimentary, although this is not to totally argue that FDI do not have a competitive impact for the countries studied, it is possible that this happens but within the data that is available for this study, this impact cannot be modelled, therefore, a future specific study on FDI could uncover this competitive impact. For the complimentary impact however, FDI is one of the positive channels through which china impacts these two countries. For example; as we have seen in the previous sections, South Africa and Angola have been recording a trade surplus with their trade with China, showing that more Chinese FDI is coming into Angola and South-Africa than it goes into china. More so, Chinese FDI from china seems to be coming more from aid and financial assistance especially to Angola, thus a viable source of FDI. The channel has therefore been complimentary such that, it has helped these two countries to fund their budget deficits and embark on capital projects that will contribute to poverty alleviation and economic development. However, bearing in mind the space limitation in the study, the general implication of this outcome will be considered in the concluding section.

CONCLUSIONS AND IMPLICATION FOR SSA

5. INTRODUCTION

This chapter is developed to summarize the present study by considering the general implication(s) of the empirical outcome for SSA, while re-examining the previous discussions and objectives. Following this, this chapter evaluates the general impact of how the accession of china into the W.T.O has affected Sub Saharan African countries.

5.1 Conclusions and Re-examination of the Main Objectives

By re-examining the previously established objectives, we can identify what has been achieved and what is left to be achieved and in so doing, give strength to the research outcomes.

OBJECTIVE ONE: Identify andanalysethe specific vector channels through which the impacts of China's accession into the WTO are transmitted to SSA countries.

It would be recalled in that in the review of literature, we developed a conceptual framework of the vector channels through which the impact of china transmits to SSA countries, this channels were then further analyzed and broadly investigated. Although, some of this channels looked as though, they were same, but a more closer look shows that are different vector channels of impact, for example, exports and trade will be more casually considered as same, but it should be noted that there are other Sino-SSA trade that happens domestically that do not necessarily come from China or to china. Therefore, base on the facts, objective one has been rightly achieved.

OBJECTIVE TWO: Examine the overall impact of China's accession into the WTO on Sub-Saharan SSA countries

In achieving this objective we have broadly established various impacts (complimentary-competitive) of SSA on the two countries under studied (Angola-South Africa). However, as was mentioned in the methodology chapter, these countries are chosen as broad examples with the results to be generalized for other SSA countries because of their seeming size and importance. Therefore, relying on the complimentary- competitive framework, it couldn't be less agreed that the impact of china on SSA countries is both complimentary and competitive, meaning that it has a positive advantage and negative disadvantage. More so, by examining the vector channels, we have discussed other extant impacts, for example; we established the aid assistance of china and how it is helping Angola to reconstruct its economy after its long cold-war.

OBJECTIVE THREE:Investigate the primary drivers of china's increasing interest in SSA

While this serves as an objective, it was also designed as one of the key research question because of its particular importance, interestingly; we noted that china's involvement in SSA is not only driven by its quest for oil and natural resources alone, but also by its quest for South-South cooperation which is deeply rooted in its believe of a common background with SSA. This fact was underpinned by our establishment of China's present activities in SSA, where we learnt that most of its current activities are based in the construction, manufacturing and trade industries and not oil alone, in fact as previously established, its activity in oil exploration and exploitation only accounts for less than 20% in total. Therefore, against the perception of many policy observers and the west that china is designing another era of Neo-colonialism, there is a modicum of pure intention in the activity of china. Although, there is a lot of underlying facts and issues that this present study did not explore, because it is out of scope concerning the intention of china in SSA, but at present, the Chinese seem to be inching more at developing the wheel of economic co-operation in ways that the west had never conceived and thus, re-writing the history of international-relations.

OBJECTIVE FOUR: Conduct a case study analysis of two SSA countries to broadly understand the extensive influence of china, using the vector channels earlier identified.

This objective was accomplished in the data analysis chapter where we looked at the bilateral trade of china with Angola and South Africa. It should be noted that the data for this particular section was obtained from several sources, both primary and secondary, but due to space limitation, most of the data could not be sufficiently explored. It should also be noted that the case study was brief but potent in that it was tailored to only look at trade and FDI mainly of China and the two African countries. Another important fact that should be established is that, the two countries studied were the best examples that can be used from SSA because of their importance and relative magnitude in the overall Sino-Africa relationship, although, other examples like Nigeria ad Sudan cold have been used, but using this them could be biased not make the results generalizable because, they do not have the assuming representation as those of Angola and South Africa.

5.2 General Conclusion and Implications

This present study has empirically investigated the impact of China's accession into the W.T.O on SSA countries by considering a number of Germaine issues in the Sino-Africa relationship. We identified the specific channels through which this impact transmits into SSA countries and what each channel holds. Interestingly, a number of extant studies on China and SSA have also examined some of the vector channels identified, but the present study by introducing other channels have been able to contribute to literature in another way, more so, this study has utilized the most up to date data to analyze each channel compared to other studies which were conducted 5-6 years ago hence, using old information and data. However, the main outcome of this study is that china has evolved as a friend and partner to Africa in an unusual style. This partnership although has spawned tremendous development for Sub Saharan countries and it has helped to improve economic growth and stability, on one hand, however, it has fuelled the fire of underdevelopment on the other hand. On the positive side, it would be noted that before the advent of the 2007 global financial crisis, SSA countries were the business hotspot of the world because of their attractiveness and stability. This stability and attractiveness can be attributed to the growing Chinese investment in SSA countries which was at its echelon during the 2006-2007 periods. For example: from 2003-2005, Nigeria has improved its budgetary allocations due to oil windfall which was majorly driven by china which was its second largest oil importer. Through the improved FDI, the country Nigeria had embarked on the biggest capital projects ever recorded in history and able to save over USD$55, billion in its foreign reserves. Interestingly, same was the case for most African countries with bilateral trade with China (Guardian news, 24 December, 2008). In addition to this, it is believed that since the years succeeding 2001 when china became a W.T.O member, the GDP of countries in SSA have improved considerably, although, the question is whether this had an effect on per capital income, but the GDP trend is noteworthy.

Lastly, the conclusion of china's implication is drawn as follows

  • Sub Saharan Countries have improved their inward FDI from china considerably since china's accession into the W.T.O
  • For countries with diversified exports to china, the distributional impact of china's relationship on the local economy have been better than those with single exports such as Sudan, Nigeria and Angola
  • China's interest in Africa is driven largely by its interest in raw materials but also with a considerable amount of positive long-term mutual partnership
  • The impact of China on SSA is both complimentary and competitive however, on the competitive side, the complimentary impacts are been diminished.
  • The implication cannot be measured on poverty reduction in SSA in this study because it is beyond its scope.

5.3 Future Research

Future research can be aimed at measuring the impact of China's relationship with Africa on per capital income and poverty in African countries; this can also be done at a case study level as in the present research in order to clearly identify how the impact manifests. More so, future studies can broadly look at other vector channels which have possibly been ignored by current researchers, like the environment and health, or Governance. Another particularly interesting area for future research could be how China's relationship with Africa influences institutionalized corruption, and its implications for democratization and human rights.

The problems posed for commodity producers

Probably the most significant opportunity opened-up to SSA by China's rapid growth is the enhanced incentives which rising demand and prices provide to commodity producing countries. Many SSA economies have rich primary product resources, including some of the poorest economies such as Nigeria, the DRC and Angola, many of whom are characterised by fragile states. Rapid growth in South Africa (and in other middle-income commodity exporters in Latin America) is an indication of the benefits which this might provide. Yet, one of the sharpest lessons we can draw from comparative international experience is that there is no clear correlation between development and commodity resources. Some commodity producers have fared well - Australia and Canada are cases in point. By contrast other commodity producers have fared badly, reflecting what some have termed the “resource curse”. In yet other cases such as Korea and Japan, rapid economic growth has occurred without significant resources - indeed, it is often argued that that they grew because of the absence of resources.

Nevertheless, China's growing demand for resources does offer significant opportunities to many SSA economies. But the lesson which can be drawn from international experience is that the benefits of this resource boom will not follow automatically - they need effective management. In addition to the link between patterns of governance and resource-exploitation (which we will consider below in Section 4..4), this poses four major challenges to economic and social policy. First and foremost, those economies with suitable natural resources, need to develop the supply elasticities required to take advantage of raised global demand and prices. This may require a combination of inputs, including enhanced infrastructure, targeted wooing of selected global resource-producing firms and the development of training and research and technology organisations (RTOs) in the respective National Systems of Innovation.

Second, resources are often finite (at least in high-grade deposits) and prices are often cyclical. There is thus a clear need to husband resource to ensure that the fruits can be drawn down over time, rather than at a single point in time. This poses important challenges for the economic management of resource rents (as Gottschalk and Prates, 2005 stress in their analysis of China's growing trade with Latin America). Clearly SSA policy-makers can gain from comparative experience in this regard. Third, and related, one of the major problems posed by a growth in commodity prices is the impact on exchange rates - the “Dutch Disease”. Higher exports and raised prices often lead to currency appreciation. This creates problems for other exporting sectors, and promotes forms of structural change which lead to a reallocation of resources from the traded- to the non-traded goods sectors. Many non-commodity exporters in SSA are beginning to suffer from these Dutch Disease effects, particularly those linked to the appreciating Rand. Here there are perverse and adverse impacts on Lesotho and Swaziland - they face the downside of a currency appreciating due to commodity exports, without benefiting on the upside from raised commodity revenues. Again, SSA governments can learn from international experience in this regard, including from relatively successful SSA economies such as Botswana. A fourth policy challenge arises in regard to the management of the environmental consequences of resource exploitation. This is most topical in relation to the depletion of forests (www.globaltimber.org.uk), which affects not only large global issues such as climate change, but also the location-specific degradation of specific environments (such as the recent mudslide in the Philippines which destroyed a whole town and arose as a consequence of illegal timber logging). These environmental spillovers are often substantial, and are not confined to the logging sector. The negative externalities may also be widespread, arising in part also as a consequence of transporting commodities to the coast.

This report was abstracted from McCormick et al (2006) to support the previous argument on African exporters and China's increasing relationship