ECON 455 Lecture 24 Impact on Least Developed Countries

ECON 455 Lecture 24 Impact on Least Developed Countries -...

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1 1 Econ455: Economic Development in China Lecture 24: April 11 Impact on Least Developed Countries Sandra Poncet Lorch Hall. room 207 Email: sponcet@umich.edu Office Hours: 2 Introduction Recently multiplication of the empirical analyses on the impact of the economic emergence of China on other developing countries Some accounts are characterized by hyperbole: - China as new engine of the developing world: “true friend of Africa” -Marginalization through competition, looting of resources, undermining governance and international human rights agenda… China may be at the same time an extraordinary opportunity… -Increase of China’s demand: huge domestic market to serve upward pressure on commodities prices access to capital for LDCs -Source of competition: reduction of prices and market shares …. and a source of challenges/threats: -China’s demand is mainly in commodities: further specialization as reduce incentives for diversification: long run costs of dependence -Its projects may pay less attention to environmental & social impact: support to rogue states annihilates international community’s efforts
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2 3 Lecture Outline Introduction I Framework of analysis A-Source of impact B-Measuring competition II-Impact of trade and FDI A-China’s offensive B-Positive outcome in the short term C-Outcome may turn negative in the long run III-Non-interference and Chinese oil diplomacy as anti- developmental? A-The no-questions asked policy B-Problems Conclusion 4 I Framework of analysis A-Source of impact 1-Trade 3 basic flows for LDCs Exports to China Imports from China Exports to Rest of World 3 important features Volume Price (Unit Value) Structure: specialization moving on the ladder Channels of impact Competition (complementarity or rivalry) -impact on production -impact on employment Vulnerability: Volatility of revenues Probability of moving up the ladder Employment opportunities Resource wars Terms of Trade and purchasing power Government Revenues: Impact on poverty however depends on inequality and accountability of gvt
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3 5 I Framework of analysis A-Source of impact 2-FDI 2 basic flows for LDCs Inflows from China Inflows from other countries 2 important features Crowding out effect: Inflow to China diverts FDI at the expenses of other LDCs Sector of investment for Chinese inflows: Determination of future technological upgrading There seems to be a consensus on the absence of a crowding out effect for Africa and also for Latin America Large proportion of FDI flows into China come from within Asia (driven by proximity) so would not have been to other places Much of the FDI in Africa/LAC is in search of natural resources or markets and is therefore location-specific. Little competition in third markets between China and other LDCs
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This note was uploaded on 03/07/2008 for the course ECON 455 taught by Professor Poncetsandra during the Winter '06 term at University of Michigan.

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ECON 455 Lecture 24 Impact on Least Developed Countries -...

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