Understanding Sino-Zambia Trade Relations: Trends, Determinants and Policy Implications

Kanenga Haggai^{1, 2,}

¹Department of Development Studies, University of Zambia, Lusaka, Zambia

²Department of International Economics and Trade, Southeast University, Nanjing, China

Cite this paper:
Kanenga Haggai. Understanding Sino-Zambia Trade Relations: Trends, Determinants and Policy Implications. World Journal of Social Sciences and Humanities. 2016; 2(2):52-77. doi: 10.12691/wjssh-2-2-5

Abstract

In the recent past, Sub-Saharan Africa recorded impressive economic growth. Many of these countries, including Zambia, benefited from external environments, such as China’s growing demand of African raw commodities coinciding with rising commodity prices. This saw unprecedented increase in both trade and investment between China and Africa. In this context, Sino-Zambia bilateral relations have deepened, especially after 2000. It is from this context of increasing Sino-Zambia/Africa trade relations and the controversy surrounding China’s engagements in Africa that this paper tried to understand Sino-Zambia Trade Relations by examining the trends and determinants of Zambia’s trade with China and the Policy implications thereof. To achieve this, the traditional augmented Gravity Model of International Trade and selected Trade Indicators such as Trade Intensity Index, Terms of Trade and Trade Potentials were used for the analysis covering 15 countries over a period of 15 years (2000-2014) on panel data. The results indicate that Sino-Zambia bilateral trade is significantly determined by Zambia’s GDP, population and the stock of investment as well as China’s GDP per capita and the stock of investment. The results also indicated that, when China is regressed together with the other partners, using the fixed effects estimation method, only partner GDP and population determine Zambia’s bilateral trade. FDI stock, RTA and PTA also showed significant and positive coefficients in influencing Zambia’s trade while border and language were found to have a negative influence on Zambia’s trade, signifying trade barriers. Further, the analysis revealed that Sino-Zambia relations have been growing rapidly, both in scope and importance as evidenced by high Trade Intensity Index and Trade Potential; and that Sino-Zambia bilateral trade relations follow Sino-African trade relations. The paper recommends urgent investments in infrastructure development, especially transport and communications and power generation as well as the formulation of consistent and appropriate policies aimed at reducing trade barriers while promoting an export led diversification agenda. The paper further recommends further detailed studies on the economic impact of Zambia’s trade with China on the Zambian Economy and on how to promote Zambia’s agricultural trade with China.

Keywords:
Sino-Zambia China-Africa Relations Gravity Model International Trade

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