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The Effect of Chinese Economic Growth on South Africa's Exports To The effect of Chinese economic growth on South Africa’s exports to China by BELLA BENJAMIN ANGOMOKO Student Number: 49133764 Submitted in accordance with the requirements for the degree of MASTER OF COMMERCE in the subject ECONOMICS at the UNIVERSITY OF SOUTH AFRICA SUPERVISOR: MS MALEFA MALEFANE MARCH 2017 i DECLARATION Student number: 49133764 I, Bella Benjamin Angomoko, student number 49133764, declare that the current study is my own work. However, I referred to other people’s work in some sections of this study and acknowledged this in reference format, both in the text and the reference list. This study has never been submitted to any other university and I guarantee that this dissertation is my own legitimate work. Signature…………………………. Date………………………………………. Bella Benjamin Angomoko ii ACKNOWLEDGEMENTS I wish to extend my deepest appreciation from the bottom of my heart to all members of the Gidaga family, both in Uganda and South Africa, for their moral and financial support towards my education. Furthermore, I would like to acknowledge the support I got from my most dedicated and hardworking supervisor, Ms Malefa Malefane, in her outstanding supervision of the study. I would also like to thank Mr Edward Lawrence of the University of Cape Town for helping me with the data for the study. iii Abstract China’s economy has been experiencing high growth since 1979. The growth of China’s economy is attributed to the growth in its international trade. China’s economic growth affects trade growth of other nations because of the combination of its huge size, rapid growth and openness. This study investigates the direct effect of China’s growth on its imports from South Africa. Keywords: China’s growth, effect of China’s growth, South Africa, international trade. iv Table of content Abstract…………………………..…………………………………………..………………iv List of tables and figures................................................................................................…...vii Abbreviations ……………………………………………...…………………...…….……viii Chapter one: Introduction 1.0. Introduction........................................................................................................................1 1.1. Background and motivation...............................................................................................1 1.2. Problem statement..............................................................................................................4 1.3. Objectives of the study......................................................................................................4 1.3.1. Specific objectives of the study...........................................................................5 1.4. Limitations of the study.....................................................................................................5 Chapter two: Literature review 2.0. Introduction.........................................................................................................................6 2.1. Theoretical review...............................................................................................................6 2.1.1. Analysing trade relationship and benefits among nations.......................................6 2.1.2. Sharing benefits arising from international trade....................................................9 2.1.3. Effects of international trade..................................................................................12 2.2. Empirical review...............................................................................................................14 2.2.1. Empirical studies on effects of China’s economic growth.................................14 2.2.2. Empirical studies on factors affecting South Africa’s international trade.........18 Chapter three: Country-based literature review 3.0. Introduction ......................................................................................................................21 3.1. China review.....................................................................................................................21 3.1.1. History of China’s economic growth.................................................................21 3.1.2. China’s exports and their influence on Chinese economic growth....................23 3.2. South Africa’s country review..........................................................................................25 3.2.1. South Africa’s international trade growth..........................................................25 3.2.2. The patterns of South Africa’s trade with its major trading partners ................29 v 3.3. Comparison of trade components of South Africa and China...........................................32 3.3.1. Growth of selected export commodities in South Africa and China…..............32 3.3.2. Growth of selected import commodities in South Africa and China……..…...34 3.3.3. South Africa and China’s exports earnings ……………………………...……35 3.3.4. Trend in world export share of China and South Africa………….…………...36 3.3.5. World ranking of South African and Chinese exports and imports…..……….37 3.4. Trade relationship between China and South Africa.........................................................38 3.4.1. Relationship between China’s growth and its imports from South Africa.........39 3.4.2. Effects of China’s growth on South Africa’s international trade.......................40 Chapter four: Methodology 4.1.Introduction........................................................................................................................43 4.2. Formulation of the model..................................................................................................44 4.3. Model descriptions............................................................................................................46 4.4. Data type and sources........................................................................................................46 4.5. Interpretation of the coefficients.......................................................................................47 4.6. Conclusion ........................................................................................................................47 Chapter five: Diagnostic tests and estimation of results 5.0. Empirical analysis ............................................................................................................48 5.1.1 Stationarity tests .............................................................................................................48 5.1.2. Serial correlation tests....................................................................................................49 5.2. Findings of the study.........................................................................................................49 Chapter six: Conclusion 6.0. Conclusion ........................................................................................................................52 Reference list...........................................................................................................................54 Appendix.................................................................................................................................62 vi Lists of tables and figures Tables Table 1: Milestones of China’s rise in total economic size……………...…………...............21 Table 2: Changes in South Africa’s trade with major exporters (1992-2012) in percentage...30 Table 3: Changes in South Africa’s trade with its major importers (1992-2012) in percentage…………………………………………………………………………………….31 Table 4: Growth of selected export commodities in South Africa and China (1992-2012)…33 Table 5: Growth of selected import commodities in South Africa and China (1992-2012)....34 Table 6: South Africa and China’s export earnings from the major importers (2000-2012) in millions of US dollars)…………………………..…………………………………………...35 Table 7: World export share of China and South Africa (1948-2012) in Percentage..............37 Table 8: World ranking of South Africa and China’s exports and imports (2000-2012)..…..38 Table 9: Stationarity tests in levels before differencing ........................................................48 Table 10: Stationarity tests in first difference after differencing.............................................49 Table 11: First equation............................................................................................................49 Table12: Second equation........................................................................................................50 Figures Figure 1: China’s annual exports of goods and services and GDP growth……………....…19 Figure 2: The growth of South Africa’s international trade 2000-2012……………...………26 Figure 3: South Africa's exports, imports and trade balance (2000-2012) in millions of US dollars………...……...…………………………………………………………………….... 27 Figure 4: Relationship between China’s GDP growth and its imports from South Africa (1989- 2013)………………………...………………………………………………………………..40 vii Abbreviations ADF Augmented Dicker Fuller BRIC Brazil, Russia, India and China BRICS Brazil, Russia, India, China and South Africa CES Constant Elasticity of Substitution EU European Union FDI Foreign Direct Investment GAO Government Accountability Office GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product H-O Hecksher-Ohlin IMF International Monetary Fund OECD Organisation for Economic Co-operation and Development P-P Phillips-Perron
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