Red dragon China and small Mauritius' trade links: an in-depth analysis

Published date30 September 2013
DOIhttps://doi.org/10.1108/JCEFTS-10-2012-0018
Pages119-144
Date30 September 2013
AuthorVinaye Ancharaz,Verena Tandrayen-Ragoobur
Red dragon China and small
Mauritius’ trade links:
an in-depth analysis
Vinaye Ancharaz
International Center for Trade and Sustainable Development (ICTSD),
Geneva, Switzerland, and
Verena Tandrayen-Ragoobur
Department of Economics and Statistics, University of Mauritius,
Reduit, Mauritius
Abstract
Purpose – Two-way trade flows between Africa and China have increased rapidly between 2001 and
2010. Mauritius being a resource-scarce economy has been no stranger to the “China phenomenon”.
China is the third largest supplier to the Mauritian market but will soon be competing for first place.
Exports to China, on the other hand, have remained marginal. The paper aims to examine the potential
impacts of China’s spectacular rise on the Mauritian economy through the trade channel.
Design/methodology/approach – The paper draws extensively on secondary data to explain
the low export penetration of Mauritian goods on Chinese markets and to examine the impact of Chinese
dominance of the global apparel market on Mauritius’ clothing exports to third markets. The paper first
considers several potential explanations for Mauritius’ low levels of exports to China, which are:
Mauritius’ exports are not competitive enough to penetrate the Chinese market; China does not need to
import from Mauritius since it produces all that Mauritius exports; and the Chinese market is relatively
closed to Mauritian exports due to high tariffs and other non-tariff barriers. The paper investigates each
of the above hypotheses using secondary data from UN COMTRADE. The paper computes a set of
revealed comparative advantage (RCA) indices for Mauritius and China and shows how they have
evolved over time. Given the inherent shortcoming of the RCA measure, the paper provides a
complementary assessment based on an analysis of cost competitiveness factors. The Export Similarity
Index and the Trade Complementarity Index are also computed to test the above hypotheses. Second,
using disaggregated data on clothing exports from UN COMTRADE, the paper analyses the product
categories where Chinese competition has been most acute.
Findings In conclusion, the whole body of evidence presented in this study points to bleak
prospects for Mauritian exporters to enter the Chinese market in a significant manner. Worse, because
most of the causes of this low export penetration are due to systemic factors – such as a lack of trade
complementarity, poor export competitiveness, export market bias and an irrational fear of doing
business in China – the current situation is unlikely to improve in the future in the absence of bold
policy measures.
Originality/value – This is the first study looking at the trade relationship between Mauritius and
China.
Keywords China, Mauritius,Export competition, Internationaltrade
Paper type Research paper
1. Introduction
The China-Africa trade has become a major issue in international affairs. Over the last
decade, China has established itself as an increasingly influential player across Africa
(Tull, 2006). Given the large-scale and scope of its engagement, this is one of the most
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
Received 18 October 2012
Revised 14 May 2013
Accepted 24 May 2013
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 6 No. 3, 2013
pp. 119-144
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-10-2012-0018
China and small
Mauritius’
trade links
119
significant developments for the African region in recent years. This development,
however, poses both threats and provides opportunities for African countries. While the
majority of Africa’sexports to China are in oil, it also exports iron ore, metals, and other
commodities,as well as a small amountof food and agriculturalproducts. Similarly,China
exports a rangeof machinery and transportationequipment, communicationsequipment,
and electronicsto African countries. In 2009,China surpassed the USA as Africa’slargest
trade partner and Sino-African trade reached $126.9 billion for 2010, while the trade
volume between China and Africa rose 30 percent year-on-year during the first
three-quarters of 2011, signalling a new record high. China’s top five African trading
partners are Angola,South Africa, Sudan, Nigeria, and Egypt (Alessiand Hanson, 2012).
Mauritiusis a small and resource poor islandeconomy but is no stranger to the “China
phenomenon”. Mauritius is arguably an outlier among SSA countries and, as such,
standard analysisof China’s impact on Africaneconomies cannot be easily generalizedto
Mauritius (Ancharaz, 2008). Chinese exports to Mauritius have more than doubled
between 2000 and 2010, propelling China into the ranks of Mauritius’ major trading
partners.China is the third largest supplierto the Mauritian market but,at current trends,
it willsoon be competing for firstplace with the EU and India.However, Mauritianexports
to China, have remainedmarginal. Further, the combinationof dwindling exports, on the
one-hand,and shooting imports,on the other, has resulted ina very large trade deficit with
China, whichhas increased over the years. The asymmetrictrade between Mauritiusand
China isa major concern but the impactof China’s economic rise on Mauritianexports into
third-country markets should also not be ignored.
The objective of this paper is to examine the potential impact of China’s spectacular
rise on the Mauritian economy through the trade channel. We investigate the
asymmetric trade between Mauritius and China. First, we examine the causes of the low
penetration of Mauritian exports on the Chinese market. Second, we assess how much
injury has Chinese imports caused to domestic import-competing industries. Lastl y, we
provide analyses of the impact of China on Mauritian exports in third markets, also
assessing the degree of resilience of the Mauritian clothing industry against the
onslaught of China in export markets.
The paper is structured as follows: Section 2 reviews relevant literature on
China-Africa trade links; Section 3 adopts a situational analysis of the Mauritian
Economy; Section 4 sets out the research questions and the methodology used; Section 5
analyses the data; Section 6 discusses the findings; and the study concludes in Section 7.
2. Literature survey
Sino-African trade relations may be well explained by the Classical Theory of
comparative advantage. African exports to China are predominantly natural resources
and, on the other side, Chinese exports to Africa mostly consist of low-cost manufactured
goods and machinery (Schott, 2008). The effects of these trade relationships on the
respective manufacturing sectors of each are very complex, and we need to conside r
some of the founding principles of the “new trade theories”, such as the fragmentation of
production and the presence of increasing returns to scale. With the case of Africa in
mind, Collier and Venables (2007) affirm that fragmentation is the splitting of the
production process along the various stages of the value chain, meaning that
comparative advantage resides in more narrowly defined tasks and that the same
competitive advantage “[...] is, in part, acquired rather than fundamental” (Collier and
JCEFTS
6,3
120

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT