No.19 Will China's Recovery Affect Africa's Prospects for Economic Growth?

The likelihood that China’s economic recovery will affect the growth of selected African economies (Botswana, Ghana, Kenya, Nigeria, and South Africa) was investigated by examining annual co-movements in GDP. Using aggregate outputs as proxies for business cycle indicators along with a threshold autoregressive estimation technique, we found evidence that the aggregate outputs of three of the aforementioned African countries are nonlinearly co-integrated with that of China. Unexpectedly, we also found that the adjustment responses of African output to downturns far outweighs responses to upturns: In particular, Nigerian output adjusts relatively quickly to offset lower levels with respect to its long-run trend vis-à-vis China’s GDP. In Kenya, by contrast, the speed of adjustment is more rapid for positive discrepancies than for negative ones. Other findings support the proposition that African economies will benefit from a China-led global recovery, though at different rates for different countries depending on whether the exports contribute to China’s production chain (as raw materials) or to its consumption chain. Over the long run, the gains from synchronization via trade of the outputs of African economies with those of China and other major economies will depend strongly on the Africans’ preparedness for the development of efficient and supportive physical infrastructure.