China and the Manufacturing Terms of Trade of African Exporters

The economic geography model of Redding and Venables (2004) is employed to decompose import growth of a large number of countries into supply and demand capacities. The results of this decomposition allow analysis of the extent to which China’s export growth has altered the demand for manufactures exported by Kenya, Mauritius, and South Africa, the largest exporters of manufactured goods in Sub-Saharan Africa. Counterfactual simulations indicate that if China’s supply capacity had stagnated at 1995 levels, textile exports in the selected countries would have been about 26 percent higher. In other manufacturing sectors, this study finds no evidence of African responsiveness to changes in market access conditions; hence, it is difficult to argue that China has affected non-textile exports from Africa. As a consequence of China’s export growth, the selected African countries have also seen substantial reductions in their import prices. However, an estimation of their terms-of-trade suggests that the reductions in export prices outweighs the decrease in import prices.