Can China’s hunger for African exports revive sub-Saharan Africa?

That's a fairly tall order considering that the region has long been economically marginalized and lacks many of the institutions that could help foster growth. The 48 nations in the area account for just 1 percent of world trade.

Yet the recent surge in exports to China has raised hopes that increased trade could help lift millions of Africans out of poverty. Thanks to China’s seemingly insatiable appetite for oil and metals, trade between sub-Saharan Africa and China soared to $32 billion in 2005 (the most recent year for which statistics are available), a 263 percent increase from 2000, according to United Nations data.

While the region's amount of trade with China is still well below Europe's ($89 billion in 2005) or the United States' ($63 billion in 2005), it's been heartily welcomed by African countries, who argue that the rich Western nations are not doing enough to help Africa and that they attach too many requirements for trade and aid.

“We like Chinese investment because we have one meeting, we discuss what they want to do, and then they just do it,” Sahr Johnny, Sierra Leone’s ambassador to Beijing, said in 2005. “There are no benchmarks or preconditions.”
 

 
China has been criticized for its no-questions-asked approach to trade and especially for its dealings with Sudan, where government-backed forces have killed hundreds of thousands of citizens over the past four years.

But the rise in African-Chinese trade has come as democracy, by and large, has been spreading in the region. In sub-Saharan Africa, 23 nations are considered free or partly free, up from three in the late 1970s, according to Freedom House, an organization that tracks the spread of democratic institutions.

So can the region’s mostly poor countries leverage trade with China into long-term economic growth?

The answer partly depends on the type of country and what it does with its commodity windfall, says Ali Zafar, an economist with the Africa Region of the World Bank.
 
“If you’re energy rich or metal rich, you’re going to benefit from China. If you’re a textile producer and an oil importer, you’re going to suffer. And if you’re something in the middle, the effects will be mixed,” Zafar says.

About a third of sub-Saharan nations, representing 44 percent of the region's 740 million people, benefit from trade with China because the commodity price boom has allowed them to buy more imports, according to a recent paper by Zafar. These countries include oil exporters Nigeria (the region’s second largest economy, behind South Africa) Angola, and Sudan, as well as Zambia, which exports copper, and Mauritania, which exports iron ore.

But countries that lose out from increased Chinese trade—whose exports are not demanded by China or are in direct competition with it—represent about 25 percent of the region's population. These oil-importing nations include textile exporters Madagascar and Lesotho, and agricultural exporters Kenya and Ethiopia.

The Red Dragon's effects on nations such as South Africa and Tanzania are more ambiguous because these resource-rich countries still must import oil.

But the benefits of trade are not strictly about higher trade volumes. China’s activity in the region has brought increased levels of aid as well as development of telecommunications, road, and railway networks. All of this has helped kick-start the sub-Saharan economy: Over the past five years, the region has grown at a relatively healthy annual clip of 5 percent.

Despite China’s contributions to infrastructure development—about 800 companies are currently working on various projects in the region—the local workforce is largely being left out. Most workers on these projects are Chinese; last year, nearly 80,000 Chinese were working on ventures throughout sub-Saharan Africa.

Policymakers also worry that the resource-centric growth could hamper economic diversification as governments become overly reliant on income from commodities. This is the classic argument for why oil-rich Middle Eastern nations have not yet been able to use their petroleum wealth to boost employment and output.

The most important factor in maintaining long-run growth, many economists argue, is developing an industrial base capable of adding value to the products it exports. Sub-Saharan Africa's future may depend on whether it can make the transformation from a commodity exporter to a manufacturing exporter.

This is how Asian nations—Indonesia after the 1960s, Vietnam and China after the 1980s—were able to use manufacturing to escape the underdevelopment trap.

In order to become dynamic manufacturing exporters, sub-Saharan Africa's nations need improved education, reduced inequality, improved health care, and a strong system of property rights, according to most development experts.

A recent study, however, suggests that many of the region's countries are already close to or above the same level on all of these measures (except for health care) as the Asian nations were when they began to escape poverty.

“The East Asian experience definitely demonstrates that some institutional weaknesses can be escaped,” researchers Simon Johnson, Jonathan D. Ostry, and Arvind Subramanian write.

But precisely because of the region's recent ability to boost exports and solicit international aid, sub-Saharan Africa will likely face a harder struggle in escaping poverty than its East Asian counterparts. Surprisingly, the study found that some of the biggest roadblocks a nation faces on the way to becoming a manufacturing exporter are periods of commodity-based growth and large aid inflows—just what sub-Saharan Africa is currently experiencing and expecting. These two factors can lead to exchange-rate overvaluation, making sub-Saharan exports less attractive on the world market.

Still, notes Zafar of the World Bank, “China’s ascent represents a way for those countries to tap into another source of funds and to use that money creatively.”

Academic research has shown that another type of trade played a large part in the region’s current underdevelopment.

Between 650 and 1900, European and Middle Eastern powers enslaved about 22 million people from sub-Saharan Africa. Besides the obvious human tragedy, the region’s economy took a wallop, as institutions that help foster growth either took much longer to develop or were never properly formed at all.

For the most part, Africans of that era had little say over what would happen to themselves or their societies. But the rise of democracy in the region means that, this time around, sub-Saharan Africa can decide for itself what will best serve its interests.