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China’s African Financial Engagement, Real Exchange Rates and Trade between China and Africa

Author

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  • Sylviane Guillaumont Jeanneney

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique)

  • Ping Hua

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UCA [2017-2020] - Université Clermont Auvergne [2017-2020] - CNRS - Centre National de la Recherche Scientifique)

Abstract

In the last decade, China's trade with Africa increased faster than its overall foreign trade. This article focusses on the role of real exchange rates in this growth. A ‘bilateral real exchange rate' augmented trade gravity model applied to China's trade with 49 African countries over the period 2000–2011 shows that the real appreciation of most African currencies relative to the renminbi favoured China's exports to these countries, but had no impact on China's imports from Africa. This real appreciation of African currencies is explained by three main factors: the decision to peg them to other currencies (in particular to the euro), the amount of export of raw materials from African countries and the amount of financial assistance from international donors including China. Thus, a kind of detrimental sequence exists in Africa's relationship with China: China's imports of raw materials and its economic co-operation are among the factors explaining the appreciation of African real exchange rates, which itself stimulates China's exports of manufactured goods, and so restricts Africa's own industrial development.

Suggested Citation

  • Sylviane Guillaumont Jeanneney & Ping Hua, 2015. "China’s African Financial Engagement, Real Exchange Rates and Trade between China and Africa," Post-Print halshs-01150612, HAL.
  • Handle: RePEc:hal:journl:halshs-01150612
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    References listed on IDEAS

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    Cited by:

    1. Sylviane Guillaumont Jeanneney & Ping Hua, 2015. "The impact of Chinese competition on Africa’s manufacturing," Working Papers halshs-01179283, HAL.
    2. Sylviane Guillaumont Jeanneney & Ping Hua, 2020. "When and how African real exchange rates relative to China affect its manufacturing?," Post-Print hal-03060589, HAL.
    3. Zhijie Guan & Yue Zhang & Ip Ping Sheong Jim Kwee Fat, 2021. "Trade Relations Between Mauritius and China: A Gravity Model Approach," SAGE Open, , vol. 11(4), pages 21582440211, November.
    4. Coletta Frenzel Baudisch, 2019. "Chinese Capital Flows to African Economies and Real Bilateral Exchange Rates," MAGKS Papers on Economics 201910, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Shuzhong Ma & Mengheng Liu, 2020. "Spatial correlation effect of China's outward foreign direct investment in countries along the One Belt and One Road," Pacific Economic Review, Wiley Blackwell, vol. 25(2), pages 228-249, May.

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