Africa’s Manufacturing Development under the Rise of China : Threat or Opportunity?

The study set out to investigate whether China’s rise complements or competes with Africa’s manufacturing sectors, using a system GMM estimator. The findings reveal that imports of intermediate manufactured goods from China boost manufacturing production in African economies but that total imports of manufactured goods dampen the growth rate of manufacturing production. Another key finding is that the positive impact of intermediate imports from China is lower when FDI is abundant. Also, although the China-invested SEZs in Africa likely contribute to manufacturing development, the majority of FDI inflows into Africa are directed not toward manufacturing sectors in Africa but instead to extractive sectors, which are less labor-intensive. Taken together these findings suggest that the African manufacturing sector faces a potential long-term inadequacy of competitiveness and investments in productivity-enhancing assets and skilled labor. These findings call for a policy of urgency in technology transfer and various productivity-enhancing assets