The impact of trading with China on Botswana’s economy
| Date | 01 February 2016 |
| DOI | https://doi.org/10.1108/JCEFTS-09-2014-0022 |
| Pages | 2-23 |
| Published date | 01 February 2016 |
| Author | Kedibonye Sekakela |
| Subject Matter | Economics,International economics |
The impact of trading with China
on Botswana’s economy
Kedibonye Sekakela
Department of International Trade and Finance,
Botswana Institute for Development and Policy Analysis,
Gaborone, Botswana
Abstract
Purpose – The purpose of this paper is to examine the impact of trading with China on Botswana’s
domestic and third markets. The paper also assesses the structure and magnitude of Botswana–China
bilateral trade.
Design/methodology/approach – The paper used descriptive statistics such as graphic analysis to
describe and summarize the basic features of the data. To reach conclusions that extend beyond the
immediate data alone, the study applied Chenery Decomposition Approach and also applied the
extension of Constant Market Share (CMS) analysis.
Findings – Botswana mainly exports primary products to China and imports intermediate and capital
goods, which are mainly used as inputs in the development of infrastructure in the country. Increased
imports from China into Botswana’s domestic market has mainly replaced imports from other
countries, and China’s textile, clothing and footwear (TCF) exports gained market share from
Botswana’s TCF exports in the third markets, i.e. South Africa. Unlike Lesotho, the loss of market share
by Botswana’s TCF exports in the South African market increased over the period under study. The
Botswana Government needs to consider ways of enhancing Botswana’s TCF export competitiveness
and learn lessons from China in relation to enhancing productivity in the TCF and other exporting
industries.
Research limitations/implications – Because of lack of data, this paper failed to estimate the
impact of import penetration in the manufacturing subsectors and analyze the rapidly growing
Botswana–China bilateral trade in services. There has been no estimate of the impact of intermediate
and capital goods on production costs of Botswana’s productive sectors. Lastly, because of lack of data,
there have been no estimates of Botswana’s consumer surplus generated from consuming relatively
low-priced goods from China.
Originality/value – This is the rst study to carry out an empirical analysis of the Botswana–China
trade relation. The study will be of value to academia and to policymakers who are interested in
studying the China–Africa relation.
Keywords China, Botswana, Chenery decomposition, Constant market share, Trade relations
Paper type Research paper
1. Introduction
In the past three decades, China has re-emerged as a major producer in the global
economy and is rapidly regaining its place as the world’s largest producer which it held
until the nineteenth century[1]. In 2012, China was ranked second after the USA in terms
of gross domestic product (GDP) (nominal gures) and second as a trading nation[2].
Over the past decade, the real GDP for China has grown in real terms by more than 8 per
cent per annum, on average, while the expansion of its exports grew at an annual
average rate of 21 per cent since 2000. China’s re-emergence and its rapid growth as a
The current issue and full text archive of this journal is available on Emerald Insight at:
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JCEFTS
9,1
2
Journalof Chinese Economic and
ForeignTrade Studies
Vol.9 No. 1, 2016
pp.2-23
©Emerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-09-2014-0022
trading nation can mainly be explained by its use of trade and industrial policies which
complemented its accession to the World Trade Organization[3]. The sheer size of the
economy has also played a role in attracting investment to China.
China’s rapid economic growth has also generated enormous improvement in the
economic performance of many countries, in particular those that have developed a
strong commercial relationship with China. Countries have beneted signicantly from
both lower costs of intermediate and capital goods and from the higher prices of basic
commodities exported to China. The trade relationship has also had negative effects on
those countries which compete with China’s exports, especially in third export markets
(Lopez et al. (2008)). Thus, the trade relationship between China and its trading partners
has resulted in economic gains and losses. China has provided a growing market for the
exporters of primary commodities and has also contributed to a price boom for many of
these primary commodities, boosting export growth in a number of developing
countries (Farooki and Kaplinsky, 2012). In the case of Africa, the engagement with
China has contributed signicantly to its export growth (Wang and Tchane, 2008).
Between 2001 and 2012, Africa’s exports to China rose, on average, by more than 30 per
cent, while Africa’s exports to the rest of the world (ROW) rose, on average, by less than
15 per cent. Beneciaries of the export growth are mainly countries with a trade
structure which does not overlap with that of China (Renard, 2011)(Lederman et al.,
2006). Most of these countries’ main exports are raw materials such as minerals,
industrial inputs and primary agricultural products (Lederman et al., 2006).
However, China’s global expansion has also lead to concerns among developing
countries (mainly Latin America and Africa) that its export growth displaces domestic
production and employment, especially for low-cost manufactures in labor-intensive
industries, and exports of manufactures of developing countries in third markets. To
date, there have been relatively few systematic studies on the impact of the growing
economic relations, especially between China and individual countries in Africa.
Existing literature mainly focuses on Africa as a continent and in few major trading
partners of China in Africa, disregarding the fact that the African continent consists of
53 individual countries with different histories, development models and political
regimes. Consequently, country case studies are necessary when studying the impact of
China on developing countries.
This paper, therefore, seeks to determine whether trading with China has an impact
on developing countries by using the case of Botswana. A decade ago, trade between
China and Botswana was limited to a narrow range of products, but this has changed
dramatically since the relationship has evolved to center on markets for each other’s
exports and Botswana’s demand for infrastructure. Bilateral trade between the two
countries surged from nearly zero 30 years ago to BWP 265 million (US$45.6 million) in
2006, and to BWP 2.1 billion (US$275.94 million) in 2012. Botswana’s total imports from
China stood at BWP 1.74 billion (US$234 million) in 2012, while Botswana’s exports to
China were worth BWP 353 million (US$47 million) in 2012.
The main objective of this paper is to examine the impact of import penetration from
China on domestic production and imports from other countries. Second, the paper
estimates the loss of market by Botswana to China in the third markets. In this case, the
paper considers the South African (SA) market, which is Botswana’s main export
market for non-mining exports. The paper also analyzes bilateral trade structure of
Botswana and China. The period under analysis runs from 2000 to 2012. The paper
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Impact of
trading with
China
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