ECON 455 Lecture 25 Conclusion

ECON 455 Lecture 25 Conclusion - Econ455: Economic...

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1 1 Econ455: Economic Development in China Lecture 25: April 16 Conclusion Sandra Poncet Lorch Hall. room 207 Email: [email protected] Office Hours: Mondays 16:30 18:30 & Wednesdays 10:30 12 2 Structure of the lecture End of lecture 24 on impact of China’s emergence on LDCs Rapid conclusion: Chinese reforms in context Final Exam
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2 3 End of lecture 24 on impact of China’s emergence on LDCs 4 1 Commodity prices on the rise. but volatile Graph 4 : Annual percentage change in commodity import prices. 1994 2004 US$ per Kg -60 -40 -20 0 20 40 60 80 100 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 yoy, % change Crude oil Iron ore Copper Cotton Unsurprisingly : prices have been rising since 2001. Prima facie . this is good for raw material producers. II Impact of trade and FDI B Positive outcome in the short run of China’s emergence 2 Increased demand and investment (from China) sustained a rather strong economic growth in the last years
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3 5 Some evidence that the countries engaged in textile clothing activities in fact were hurt by Chinese competition as T&C quota were removed II Impact of trade and FDI B Positive outcome in the short run AGOA: African Growth and Opportunity Ac 6 Benefits of rising demand for and investment in commodities & infrastructure & inflated prices may be attenuated by long term costs II Impact of trade and FDI C Outcome may turn negative in the long run 1 Reinforcement of dependence on primary resources: resource curses price volatility (Dutch disease) no incentive to diversify deindustrialization: reduction of employment weakening of institutions: more corruption and “resource wars” complacency: no investment to make investment to make growth sustainable in the medium term *skill formation *infrastructure primary resources industry have lower spillover effects on the economy: less likely to fuel innovation and TFP. 2 Reduction of the opportunity/incentive to move up the quality ladder and the production chain
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4 7 Graph : Trends in Diversification of selected African Countries 1998 / 2002 Herfindahl index* Notes : * The diversification indicator measures the extent to which exports are diversified. It is constructed as the inverse of a Herfindahl index. using disaggregated exports at 4 digits (following the SITC3). A higher index indicates more export diversification ** Include Botswana. Lesotho. Namibia. South Africa and Swaziland. Africa’s trade redirection towards China could derail the endeavors by African commodity producers to diversify away from traditional exports and push them back into commodity dependence 8 III Non interference and Chinese oil diplomacy as anti developmental? A The no questions asked policy Sierra Leone’s ambassador to China quote: ‘The Chinese just come and do it. They don’t hold meetings about environmental impact assessments, human rights, bad governance and good governance. I’m not saying it’s right, just that Chinese investment is succeeding because they don’t set high benchmarks.’
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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 25 Conclusion - Econ455: Economic...

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