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china with developing countries
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China’s Economic Relations with Developing Countries
Barbara StallingsBrown UniversityDecember 12, 2007
Agenda for Presentation
Introduction
Characteristics of Chinese economy
Statistical overview of China’s relations with developing countries
Regional sketches
Conclusions
Introduction
Joint venture with two colleagues Importance of topic Increased role of China as partner for
developing countries in last decade Vast differences across regions Opportunities and challenges
Five Characteristics of China’s Economy
Very high growth in very large economy
Output structure (dominance of industry)
Sources of growth (investment, exports)
Major role of FDI in China
Changing composition of trade
Possible changes going forward
Comparative GDP Growth
0
2
4
6
8
10
12
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
China Asia EU World US Japan
Exports and Imports (% GDP)
0
5
10
15
20
25
30
35
40
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Exports Imports
Sources of Growth (Output)
0
2
4
6
8
10
12
2002 2003 2004 2005 2006
Services Industry Agriculture
Sources of Growth (Demand)
0
2
4
6
8
10
12
2002 2003 2004 2005 2006
Net Exports Investment Government Private
Foreign Direct Investment
0
10
20
30
40
50
60
70
80
90
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005
Inflows Outflows
Composition of Trade
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1987 1995 2003 1987 1995 2003
Primary Resource Low Medium High Electronics
Exports Imports
China and Developing Economies
Main positive contributions
-- Imports provide markets
-- Positive price effects
-- Outward FDI, aid provide funds
Problematic elements
-- Exports provide competition
-- Price effects in reverse
-- Inward FDI may crowd out others
Chinese Imports by Region
Region $ bn % $ bn %
North America 19.0 13.7 69.6 8.8Europe 21.5 15.5 97.2 12.3Asia 81.9 59.0 500.8 63.3 Japan 29.2 21.0 115.7 14.6 Other Asia 52.7 37.9 385.1 48.7Africa 1.5 1.1 28.8 3.6Latin America 3.3 2.4 31.5 4.0
World 138.8 100 791.5 100
1996 2006
Developing Country Exports to China
Region/country$ billions % exports $ billions % exports
Asia 180.1 18.4 511.3 22.3 Korea 14.2 10.9 77.4 27.2 Taiwan 32.0 24.8 96.4 38.9 Singapore 13.6 10.9 41.3 20.0Latin America 4.2 2.6 21.7 3.7 Brazil 1.5 3.1 6.8 5.8 Chile 0.5 3.0 4.4 11.1 Peru 0.5 8.1 1.0 11.0Africa 1.6 1.6 17.8 7.4 Angola 0.2 4.4 6.0 30.0 Congo 0 0 2.1 38.9 Sudan 0.04 7.7 3.4 70.8
1996 2005
China as Source of Growth
Region/Country Growth of totalexports ($ bn)
Asia 288.0 1026.4 28.1 Korea 48.3 112.1 43.1 Taiwan 49.2 78.9 62.4 Malaysia 10.1 42.8 23.6Latin America 17.1 218.7 7.8 Brazil 6.2 58.9 10.5 Chile 3.6 20.2 17.8 Peru 1.4 10.4 13.5Africa 13.5 107.0 12.6 Angola 4.3 12.8 33.6 Congo 1.9 3.2 59.4 Sudan 2.8 3.2 86.3
Growth of exports Share of totalto China ($ bn) export growth (%)
China’s Import Characteristics
Region$bn % $bn % $ bn % $ bn %
Northeast Asia 1.6 0.9 12.7 7.2 162.4 91.9 85.8 48.5
Other Asia 15.3 7.7 35.2 17.8 146.7 74.3 112.9 57.2
Africa 2.0 6.9 24.5 85.1 1.9 6.6 0.4 1.4
Latin America 9.0 28.6 18.2 57.8 4.3 13.7 2.2 7.0
Ind. Countries 18.5 6.5 17.7 6.3 245.5 86.9 156.0 55.2
World 51.7 6.5 158.3 20.0 579.5 73.2 357 45.1
Agriculture Fuel/Minerals Manufactures Machinery
China’s Inward FDI (Flows)
$ bn % $ bn %
Asia 45.1 27.7 88.3 28.4 China 38.4 23.6 76 23.8 ASEAN 5.2 3.2 14.4 4.5Latin America 79.8 49.0 69.4 21.8 Brazil 32.8 20.1 18.8 5.9 Mexico 17.1 10.5 19.9 6.2EEurope/CAsia 25.2 15.5 116.4 36.5 Russia 2.7 1.7 28.0 8.8 Turkey 1.0 0.6 19.0 6.0Africa 3.5 2.1 12.5 3.9
Total 162.8 100 318.7 100
China’s Outward FDI (Stock)
Region/country 2003 2006$ bn Share $ bn Share
Asia 26.51 91.40 46.58 83.07 Hong Kong 24.62 84.90 42.27 75.39 ASEAN 10 0.24 0.83 1.76 3.14 Korea 0.15 0.52 0.95 1.69Africa 0.49 1.69 2.56 4.57 Algeria 0 0 0.25 0.45 Nigeria 0.03 0.10 0.22 0.39 Sudan 0 0 0.50 0.89Latin America 0.40 1.38 0.74 1.32 Peru 0.13 0.45 0.13 0.23 Mexico 0.10 0.34 0.13 0.23 Brazil 0.05 0.17 0.13 0.23US/Europe 1.04 3.59 3.86 6.89World 29.0 100 56.07 100
China and Northeast Asia
Most advantageous position; high development; leading role in Asia
Export capital goods and FDI to China
Import consumer goods
Successful, but concerned re future
Strategies: alter division of labor? global strategy
China and ASEAN (5)
Medium development level; also integrated into Asian production
Most vulnerable group at present: direct competition with China in low- to-medium skill goods and FDI
Strategy:-- Upgrade skills
-- Speed up ASEAN regional integration-- Deepen alliance with Japan
China and Africa
Much less developed; blame colonial past; welcome China as new kind of partner
Export raw materials; import industrial goods
Investment and aid to support exports Many fewer concerns about China, but
some worries about domestic industry
China and Latin America
Development level similar to ASEAN, but geography, history very different
Commodity exports to China and industrial imports; fears re both
FDI: some competition, some inflows
Strategy options similar to ASEAN
Conclusions (1)
China has very different impact across regions because of geography and development level of partners
Most positive cases: nearby countries that build on dynamic comparative advantage to take part in production chains and complement China on the high end of production
Conclusions (2)
Most problematic cases: countries that take part in arms length trade and compete on basis of static comparative advantage (commodities, low-skill goods)
Policies? We know many of the answers; problem is implementation
Education and training; investment and technology; infrastructure; finance
Conclusions (3)
Possible changes in China’s economy Slow-down in growth? Greater consumer orientation? Impact on developing countries: winners
and losers (location, sector) Developing countries must seek greater
expertise to make strategic decisions
China’s Economic Relations with Developing Countries
Barbara StallingsBrown UniversityDecember 12, 2007