China and India's Commodity Demand Boom, the Chinese FDI and the Primary Sector Locking Effects for Africa.
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Date
2010-05
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A.A.U.
Abstract
The implications of the recent ADs' growth surge for the industrial development of African
countries have been the subject of recent allention. The literature, however, focl/sed on the
impact of ADs ' growing competitiveness in labor intensive manufactured goods on the industrial
development strategy of the continent. This study, motivated by this bias in literature, explores
whether the recent ADs' commodity demand boom significantly stimulated African countries to
re-deepen their specialization in the production and export of traditional commodities. The study
employed a non-parametric test of 'Galtonian regression method' to test the re-deepening
specialization paltems of African countries. Then, the multi-country version of the HOV model is
used to uncover the specialization patterns with the ADs' commodity imports and the Chinese
FDI flows are used to augment the model. The non-parametric test shows that African countries
are characterized by re-deepening specialization patterns with the exception of few countries
and few sectors. While China's commodity imports are significantly locking African countries in
the production and export of traditional commodities, China's FDI and India's commodity
imports are not important in such patterns. Furthermore, the result indicates that the intensity of
the impacts of China's commodity demand boom on the export structure of Africa varies across
commodity groups and the indirect impacts are more significant than the impacts of direct
bilateral commodity imports from African countries. This calls for innovative policy responses to
China and the need to balance between the temporGlY resource windfall gain. and the future
industrialization strategies of the continent.
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Keywords
export, commodity demand boom, the Asian Drivers, export structure and system GMM