1. IS CHINA CROWDING OUT SOUTH AFRICAN EXPORTS TO SUB- SAHARAN AFRICA? Lawrence Edwards (UCT) Rhys Jenkins (UEA)

2. GROWING INVOLVEMENT OF CHINA IN SUB-SAHARAN AFRICA Trade links - total trade between China & SSA increased from US$7.5 bn. to US$113 bn. (2001-2011) Chinese FDI in Africa – US$13 bn. In 2010 Chinese technical cooperation Most of the discussion has related to the role of China in oil, mining and infrastructure projects; less attention to manufacturing.

3. CHINA, SOUTH AFRICA AND SSA Chinese exports to SSA increased 13-fold 2001-2011 (mainly manufactures). Some studies looking at impacts on domestic market in destination countries. None looking in detail at implications for South African exports to these markets. SSA an important market - 22% of total SA exports of manufactures

4. RESEARCH QUESTIONS Are China and South Africa competing with each other in SSA markets, how extensive is such competition and how is this changing over time? To what extent has Chinese competition led to the displacement of South African exports? In which countries have South African exports been most affected? Which South African export sectors face the greatest threat from Chinese competition?

5. DATA Reporter countries South Africa, Australia, Canada, Germany, Spain, France, UK, Italy, Netherlands, USA, South Korea, ASEAN 5(Singapore, Malaysia, Indonesia, Thailand, Philippines), Hong Kong, India, China African partner country Zambia, Zimbabwe, Mozambique, DRC, Nigeria, Angola, Kenya, Tanzania, Malawi, Ghana TimeAnnual from 1997 to 2010 ProductHS6. Rev 96 Source:UN Comtrade

6. SHARES OF SA AND CHINA IN MANUFACTURED IMPORTS OF 10 SSA COUNTRIES

7. SA SHARE OF MANUFACTURED IMPORTS BY COUNTRY

8. CHINA SHARE OF MANUFACTURED IMPORTS BY COUNTRY

9. GROWTH AT THE INTENSIVE AND EXTENSIVE MARGINS, 1997-2010 South AfricaChinaOthers Intensive76.446.348.3 Extensive23.653.751.7 Exit-1.8-0.7-7.8 Entry25.454.459.5 Average log growth rate9.423.410.6

10. GROWING OVERLAP OF SA AND CHINA EXPORTS

11. INDEX OF COMPETITIVE THREAT FROM CHINA FOR SA EXPORTS

12. POTENTIAL IMPACTS OF CHINA ON SA EXPORTS Most studies of impact of China on other countries exports focus on products which both countries export (intensive-intensive margin). But over half of growth of Chinese exports to SSA have come through entry into new products (extensive margin). Important to look at both intensive and extensive growth by China and to see how these affect South African growth at both intensive and extensive margins.

13. GRAVITY MODEL Estimating equation derived from a gravity-type trade model. and i is the exporter, j is the importer, k is the product and t is the year, and DSA is a South African dummy variable. A positive sign for 2 indicates the Chinese exports affect South African exports positively relative to alternative export suppliers.

14. IMPACT OF CHINESE EXPORTS ON SA EXPORTS (MARGINAL EFFECTS)

15. SUMMARY OF RESULTS South Africa is less likely (relative to other exporters) to export a product to a market where China already exports or enters (extensive-extensive margin). However, this effect is felt at the margin with only a minor impact on the value of SA trade flows. In product-market combinations that overlap for China and South Africa, Chinese export growth negatively affects South Africas exports relative to other countries (intensive- intensive margin). Chinese export growth in particular product-market combination reduces probability that SA exports in the same product-market combination (relative to other countries) (Intensive-extensive margin), but the overall impact on the value of SA exports is low.

16. IMPACT ON SA EXPORTS Seen that there competition between Chinese and SA exports to SSA has increased significantly over time. Some evidence that Chinese exports have negative impacts on SA exports of the same product. Now try to quantify the size of this impact. Two approaches: Simulation using the coefficients from the econometrics Decomposition using extension of CMS analysis

17. CROWDING OUT OF SA EXPORTS, 1997-2010

18. CROWDING OUT OF SA EXPORTS BY COUNTRY, 1997-2010 crowded-out exports (US$ mill) Share 2010 value Share total impact Total187620%100% Angola18328%10% Ghana8725%5% Kenya13520%7% Mozambique37122%20% Malawi5012%3% Nigeria16428%9% Tanzania10319%6% DRC16420%9% Zambia34921%19% Zimbabwe27014%

19. SA LOSS OF MARKET SHARE TO CHINA, 2001-10 (DECOMPOSITION ANALYSIS) Loss in US$ mn. Loss as % of 2010 Exports Share of total for 10 countries Total-9199.9%100% Angola-17226.3%18.7% DRC-738.8%8.0% Ghana-5516.0%6.0% Kenya-669.8%7.2% Malawi-378.8%4.0% Mozambique-17611.5%19.2% Nigeria-6711.3%7.3% Tanzania-12322.7%13.4% Zambia-895.3%9.7% Zimbabwe-603.0%6.5%

20. IMPACTS OF CHINA ON SA EXPORTS BY TECHNOLOGY LEVEL Loss to China (us$mn.) % of SA Exports 2010 % of Total Loss Resource Based -161 856-6.4%17.6% Low Tech-281 006-13.0%30.6% Medium Tech -365 719-9.3%39.8% High Tech-110 273-17.5%12.0%

21. SECTORS MOST AFFECTED BY CHINESE COMPETITION In absolute terms Electrical and electronic equipment Boilers and machinery Iron and steel and products of iron and steel Vehicles In relative terms Textile and apparel Partly reflects low level of exports (at end of period)

22. CONCLUSIONS Limited competition between SA and China in late 1990s. Increasing competition post-WTO accession – result of Chinese expansion at both extensive and intensive margins. SA exports to SSA markets 10-20% lower in 2010 compared to counterfactuals. Up to now impact on SA exports has been less pronounced in neighbouring markets (Zimbabwe, Malawi and possibly Zambia). Although SA exports have declined in relative terms and this is partly attributable to crowding out by Chinese products, this has not meant a decline in the value of SA exports to these markets.