Undergraduate Dissertation Proposal
INCLUDEPICTURE “http://bysj.zjgsu.edu.cn/styles/images/logo.gif” * MERGEFORMATINET INCLUDEPICTURE “http://bysj.zjgsu.edu.cn/styles/images/logo.gif” * MERGEFORMATINET INCLUDEPICTURE “http://bysj.zjgsu.edu.cn/styles/images/logo.gif” * MERGEFORMATINET INCLUDEPICTURE “http://bysj.zjgsu.edu.cn/styles/images/logo.gif” * MERGEFORMATINET Title?THE IMPACT OF EXCHANGE RATE FLUCTUATION ON INTERNATIONAL TRADE BETWEEN CAMEROON AND CHINA.
Major?INTERNATIONAL FINANCE 15 C
Student Full Name: MEGUEPTCHI GAMO ORLEMANE
Advisor: ?? ??
International trade has existed throughout history. Its economic, social, and political importance has been on the rise in recent centuries. Cameroon has been trading with China even before the establishment of diplomatic relations in1971. This paper discusses on the effect of exchange rate fluctuation on international trade specifically between Cameroon and China. China’s economy has expanded by leaps and bounds, at historically unprecedented rates. The rapid growth of China has also been paralleled by its emergence as a major trading power in the world. After independence, Cameroon pursued a policy of import-substitution through the promotion of the competitiveness of local industries and the processing of local raw materials, with the hope of fostering the growth and development of the country. The state consequently set up huge agro industrial complexes and also encouraged and supported the creation of small- and medium-sized enterprises owned by locals in a strategy that had been described as the domestication of enterprises by the political entrepreneurs. This was accompanied by a trade policy characterized by both tariff and non-tariff barriers, aimed at establishing a national industrial base. The tax structure comprised about 20 different taxes, which were selectively applied with some as high as 120%. Quantitative restriction of imports was widespread. Nowadays therefore, Cameroon does not have any official policy to protect local industries against cheap Chinese imports. It will be interesting therefore to know how Cameroon will deal with the influx of cheap imports from China and the threat to its industrialization effort. Therefore, this paper commences by giving a comprehensive and stimulating introduction followed by the background of international trade in Cameroon specifically the trade between Cameroon and China. The paper continues by stating the scope and objectives of the research which guided the Author and all the Achievements generated during the work. The main objective of this study is to analyse Cameroon’s trade structure and evolution, with specific focus on China’s contribution; examines the evolution of Cameroon’s and China’s trade policy, with reference to market access conditions. China’s share of imports (essentially manufactured goods) to Cameroon and export (few primary products) from Cameroon have grown noticeably between 2010 and 2015. Below achievements comes the overview of the dissertation in which the Author explained how Cameroon economy has being affected by its trade with China. In general, Chinese goods have quite a positive impact on Cameroonian consumers, especially those with low level income. Taxis services are being complemented by imported motorcycles from China in the main cities. Although there is insecurity, environmental and spare-part-intensity concerns, Chinese bikes are increasing the supply of taxi services, creating jobs, and generating government revenue. Battery production in Cameroon is under immense competitive pressure with production and turnover sinking and other firms producing goods similar to those imported from China suffer the same fate. To discharge some of the competitive pressures on the local industries, there is need to downsize the fraudulent entry of goods into the country. Policy makers can also protect some strategic infant industries by dialoguing with China. By strategically using fiscal policies and dismantling administrative bottlenecks that act as a drag on private initiatives,
Keywords: Cameroon –China, International trade, exchange rate
IntroductionWithout the fluctuation of exchange rate, the economy and the world enjoys a pleasant and diplomatic trading atmosphere. Trading activities and foreign direct flows will run smoothly. No foreign currency will be exchanged leaving the home country lamenting. A country will not be afraid to allow foreign investors to invest and vice versa. The country will gain a balance of payment surplus hence the economy will boom. When exchange rates fluctuation set in, a depreciation in the home currency will lead to a lower capital investment to foreign investors, decline in export prices in a foreign currency while increasing import prices in the domestic currency causing and economy downturn.
The Chinese economy continues to grow fast by international standards as it enters the 13th Five-Year Plan period (2016-20). While growth is still high but gradually and appropriately moderating as the population ages and the economy rebalances from investment to consumption ,GDP per capital remains on course to almost double between 2010 and 2020. As a result, the Chinese economy will remain the major driver of global growth for the foreseeable future. (OECD, 2017; p.6). China’s growth has long been driven by capital accumulation, supported by high savings. China’s share of global economy was 14.8% in 2015 with nominal GDP of $11.0 trillion (visual capitalist 2017). According to Rodrik (2006, p.1), “China’s economy has expanded by leaps and bounds, at historically extraordinary rates that few economists would have found plausible or feasible ex-ante”. The rapid growth of China has also been paralleled by its emergence as a major trading power in the world. In 2014, China exported goods with a total value of more than 2.3 trillion U.S. dollars and imported goods with a value of 1.96 trillion U.S. dollars, making it the leading export and second largest import country worldwide. In 2015, China was ranked second among the countries with the largest gross domestic product, following the United States (statista 2018).
The growth of China’s trade with Africa mimics its trade in the world, though starting from a low level. Bilateral trade between China and Africa stood at $149.1 billion in 2016. Trade between Africa and China is shooting up by 19 percent every year. In the first half of 2017, they totalled more than $85.3 billion in value. Chinese imports from the African continent almost doubled by an estimated 46 percent, compared to the same period a year ago reaching around $38.4 billion China is currently Africa’s largest trading partner. China has vigorously defended its economic and trade relations with African countries. It needs more natural resources such as oil, gas, and minerals for its rapidly growing economy, while Africa needs more investment in basic infrastructure to develop its potential. Africa has already attained a trade deficit with china as the nature of its bilateral trade with china raises an alarm as exports to china are mainly focused around a limited number of products mostly classified as commodities. The level at which a slowdown in bilateral trade will affect African exports depends on how exposed these commodities are to shifts in Chinese demand.
African exporters will be affected greatly as china has started to slowdown as a result of its rebalancing towards more sustainable direction. A slowing china in the context of economic rebalancing will lead to a drop in demand for most African commodities such as minerals, iron ore and oil. This will affect mostly countries which benefit the most from Chinese trade like Cameroon. After independence, Cameroon pursued a policy of import-substitution through the promotion of the competitiveness of local industries and the processing of local raw materials, with the hope of fostering the growth and development of the country. Nowadays, Cameroon does not have any official policy to protect local industries against cheap Chinese imports. Both countries are members of the WTO, which works against trade protection and Cameroon is constrained by it sub-regional obligations from negotiating unilateral trade deals with China. It will be interesting therefore to know how Cameroon will deal with the entry of cheap imports from China and the threat to its industrialization effort. Since the introduction of the floating exchange rate system during the 1970s, many studies have been presented to show the relationship between exchange rate fluctuations and international trade. Most studies have provided evidence that the increase of exchange rate volatility dampens international trade as expected. Sherzod (2007), BAAK (2008), Kurihara (2013), Nicita (2013), Basirat et al (2014), Hou (2014), TWAMUGIZE et al (2017) showed increased exchange rate fluctuations impact negative effects on international trade, especially exports
Background and ContextRecently there is being an unusually change in exchange rate. Since mid-2014, the Dollars has appreciated in real effective terms by more than 10 %, while the Euro has lost more than 10 % of its value. In mid-2016, the devaluation of the Nigerian naira against the Dollar led to a significant imbalance in the financial sector as exchange rate volatility fell. Since the beginning of 2017, Chinese yuan has appreciated by about 10 percent against the Dollars.
This unusual large exchange rate changes is causing a typical fluctuation in currencies affecting more emerging markets and developing economies (EMDEs) than advanced economies (AEs). China has faced three sequential years of depreciation. In 2015 Chinese yuan had depreciated quite a lot against the dollars. The main reason was to make export attractive due to economy slowdown. Due to the oil crisis which affected many countries, there was sluggishness in Chinese export and the best way to stimulate the economy was by depreciation.
The CFA franc has depreciated by about 35 percent against the dollars. The CFA franc has been pegged to the Euro (1 Euro = 655.957 FCFA) with convertibility guaranteed by France since 1999 as it lost half of its value in 1994 after a serious devaluation. The CFA franc follows the appreciation and depreciation of the Euro. Normally an appreciation of the euro against the dollar makes import cheaper but reduces the value in terms of exports earnings by undermining industrial development in the CFA member countries. Moreover, because export earnings are generally reported in dollars, the CFA zone must often convert into euros. One of the benefits of the CFA franc is that it enjoys the fixed parity vis-à-vis the Euro.
It is important to know that, an exchange rate regime categorized as “pegged” does not certainly means it will have a lower exchange rate fluctuation than unpegged currencies. A currency pegged to an anchor currency exposes the country to fluctuation in the anchor against other currencies. A peg that turn out to be misaligned can create exchange market pressure and distinct changes in currency values which will further lead to exchange rate fluctuation.
Currency fluctuation has huge consequences on design of optimal policies and trade competitiveness. Standard theoretical models predicts that change in currency directly affect consumer prices. A domestic devaluation will cause a decline in export prices in a foreign currency while increasing import prices in the domestic currency, hence leads to more exports and less imports (Leigh et al, 2017).The value of trade between US-Euro area and that of the Euro area-China is less affected by currency fluctuations than US-China which is suggested that its trade imbalance is caused by many factors including exchange rate.
Exchange rate plays a significant part between a country and its global supply chains. The effects of a decrease or increase in exchange rate on any finished product might be complex since export usually include a great proportion of imports (i.e. for any given exporter, the price of imported products increases). For domestic producers, if devaluation of exchange rate reduces the cost of the final product exported, it increases the price of the imported product.
Research have shown that, exchange rate does not only affect international trade but also foreign investment flows and the debt servicing. According to Bourdon and Korinek (2011) depreciation in a country’s currency implies that the nominal value of debt denominated in foreign currencies increases relative to the country’s resources in local currency whereas its local-currency denominated debt decreases in value for foreign creditors. Therefore a depreciation in a currency will lead to a cheaper capital investment to foreign investors.
The bond between exchange rate and international trade relates to exchange rate fluctuation. The simple reason why a rise in exchange rate will lead to a decline in international trade is that of risk and transaction cost connected to exchange rate hence reducing trade. Currency exchange rates are being influenced by the balance of trade through its effect on the supply and demand for foreign exchange. When a country’s export isn’t equal to its import, it means there is either more demand or supply for the country’s currency, which affects the price of that currency on the world market.
Cameroon has been trading with China even before the establishment of diplomatic relations in1971. The value of trade leaped to more than US$2.251 billion in 2014, up from only about US$1.850 billion in 2013. In 2015, trade between the two countries dropped to US$2.049 billion. Trade between Cameroon and China has increased significantly over the past 15 years. China’s imports from Cameroon have consisted largely of oil, wood and cotton products (Jansson, 2009). Currently three Chinese companies are either prospecting or extracting iron ore or oil in Cameroon (Weng et al., 2015). One is Sino Steel, a national iron ore company based in Yaoundé, another is the Chinese private company, Hanlong Ltd., Which is linked to a controversial iron ore project in the rainforests of the Congo Basin in Southeast Cameroon. The third is a Chinese oil exploration company, Yanchang Logone Ltd, which operates in far north Cameroon. Cameroon’s main trading partners and sources of both foreign investment and development assistance are China, France, India, Spain, and the Netherlands, all members of the Organization for Economic Co-operation and Development (OECD). These countries are also the main export destinations for Cameroon. Other traditional export destinations are Nigeria and the United States.
1.2. Scope and Objectives (edited after chapter 4)
This research was conducted with profound interest in in international trade. International trade nowadays is at the heart of the global economy and is responsible for much of the development and prosperity of the modern industrialized world. Many studies have been presented to show the relationship between exchange rate fluctuations and international trade since the introduction of the floating exchange rate system. The scope of my research was to acquire the fundamental knowledge as current as possible. Cameroon was the main focus as its economy is been affected by Chinese goods.
The main objective of this study was to empirically analyse the relationship between exchange rates and international trade and assess its impact on the Cameroonian economy. The specific objectives are:
To analyze Cameroon’s economic structure and performance, paying particular attention to the role of trade with China.
To analyze Cameroon’s trade (export and imports) structure and evolution, by key sectors, with specific focus on China’s contribution;
To identify and analyze opportunities derivable by Cameroon and challenges from its trading relationship with China;
Based on the findings to make appropriate recommendations.
1.3. AchievementsThe achievements of this study lies on the recommendation made at the end of the study and their implementation. In general, the research is immense benefit to the following:
1. Importers and exporters who always trade and are in need of direct finance.
2. Policy makers of BEAC (Banque des Etats de l’Afrique Central) who issue guideline governing international trade practices.
3. Banks especially the commercial banks.
4. Students of banking and finance who might take a cue from the work done have to further research into the field of exchange rate fluctuations and international trade.
5. The general public who have a right to contribute and informed to the activities of our banking institutions.
It is hoped that the, findings and recommendations of this study will be of great importance to the above mentioned group.
1.4. Overview of DissertationToday, international trade is at the heart of the global economy and is responsible for much of the development and prosperity of the modern industrialized world. The introduction elaborates the problem statement of the research. The introductory background provides information about exchange rate and international trade and also the past and current trade between Cameroon and China and how the trade has increased significantly. Also described in the introductory chapter are my achievements and Scope and objectives of my research. The second section presents the detailed literature review of most sources of information used in the research. The third chapter of the thesis is reserved for methodology. The first part we used primary data in which a questionnaire was administered and the second part we use secondary data to explain Cameroon-China trade relations including the exports to China and imports from china. The fourth chapter is for empirical analysis where we analyse our results from the questionnaire and conclude whether there is a significant relationship between exchange rate and international trade between Cameroon and china. The last part of the thesis is the conclusion in which the research is summarized and policy suggestions are provided to help solve and avoid the current challenges faced.
LITERATURE REVIEWGENERAL REVIEW
RELATIONSHIP BETWEEN EXCHANGE RATE FLUCTUATION AND INTERNATIONAL TRADE
Exchange rate is the attacker to most businesses that operate internationally once there is global instability. Since the introduction of the floating exchange rate system during the 1970s, many studies have emerged to demonstrate the relationship between exchange rate fluctuations and international trade. Since then, the introduction of a common currency in Europe has promoted this dispute. Aninpah (2009) a large part of the literature holds that trade is important for growth. Such an observation derives from studies concluding that outward-oriented economies consistently have higher growth rates than inward-oriented economies.
Most studies reveals that increase in exchange rate volatility reduces international trade. Marquez and Schindler (2006) estimated the responsiveness of Chinese trade to changes in exchange rate without using proxies for trade prices using data from 1995-2005. The Result suggested that 10% real appreciation of the RMB lowers the share of aggregate Chinese exports by a half of a % point. Same appreciation lowers the share of aggregate imports by about 10th of a percentage point. Kurihara (2013) examined the relationship between international trade and exchange rate fluctuations in developed and developing countries. Panel data was used to conduct a dynamic panel model. The findings indicated that exchange volatility negatively influences international trade in developing countries. As the volatility exchange rate increases, it dampens international trade. He went further to explain that exchange rate volatility does not significantly decrease international trade. The reason would be that as financial market development has been attained, many hedging or covering instruments have been developed to combat exchange rate volatility. Nicita (2013) investigated the importance of exchange rates on international trade by analyzing the impact that exchange rate volatility and misalignment have on trade and then by exploring whether exchange rate misalignments affect governments’ decisions regarding trade policies with panel dataset comprising about 100 countries and covering 10 years (2000-2009). The relationship between trade and exchange rate volatility and misalignment was measured by a panel gravity model. The investigation lead to the following results first, exchange rate volatility does not affect international trade except in the occurrence of currency unions and pegged exchange rates. That is, any relationship between the volatility and trade variables is most likely driven by the underlining long-term policy credibility provided by currency unions and pegged exchange rates rather than short-term volatility itself. The second finding was that exchange rate misalignments do affect international trade flows in a substantial manner. Currency undervaluation is found to promote exports and restrict imports and conversely in the case of overvaluation. In magnitudes, misalignments across currencies result in trade diversion quantifiable in about one per cent of world trade. It also support the argument that trade policy is used to compensate for some of the consequences of an overvalued currency, especially with regard to anti-dumping interventions. Hou (2014) Analyzed the RMB real effective exchange rate change on the influence of the export of general trade and processing trade exports. Using monthly data from 2005 to 2013. The results showed that the effects of real effective exchange rate on general trade export was larger than the impact on the export processing trade industry. The reason may be because due to the impact of RMB appreciation, the general trade due to the impact technology is relatively large at the beginning of the appreciation of the renminbi, in the short term, it cannot have too much technological innovation, so as to affect exports greatly. Guneren and Kibritci (2014) determined the impact of exchange rates on imports and to investigate the impact of exchange rates on exports of economically developing countries. The Panel co-integration method is used with an annual frequency between 1985 and 2012 for 22 emerging countries. The Result, showed there was co- integrated relationship between effective exchange rates and exports-imports of emerging countries in the long run. In total 5 of 22 emerging countries had both long term relationship and short term parameters and were statistically significant. The error correction parameters for export was negative and significant while there was a long term relationship between the effective exchange rate index and export.
Also, few studies have focused on developing and newly industrialized economies Sherzod (2007) found out that export and import are stationary time series around time trend. Effects in short run changes of volatility are negatively associated with export and import. From another point, the relationship is appeared to be positive when admitted the fact that traders being aware of the previous period fluctuations made appropriate decisions regarding the volume of their trade in Sweden. BAAK (2008) findings showed that the currency value of China has long-run negative impacts on the export volume of China. Similarly, the currency value of the US turns out to have long-run negative impacts on the export volume of the US. Therefore, the recent revaluation of the Chinese renminbi is expected to have positive impacts on the US exports to China, but negative impacts on the Chinese exports to the US in the long-run, if other factors are not changed. Bourdon and Korinek (2011) Mentioned that a rise in national income can lead to an increase in the value of domestic imports through the increased purchasing power of domestic consumers. They investigated the impact of exchange rate on bilateral trade in large economies and found out that exchange rates in large economies do not drive trade flows whereas it does in smaller economies or developing countries. Baek (2013) Results showed that Korea’s exports and imports are relatively sensitive to the bilateral exchange rate in the short-run, but less responsive in the long-run. He also found that income in the two countries has significant impacts on the bilateral trade flows in both the short- and long-run. Finally, exchange rate uncertainty and Japanese FDI to Korea are found to have little impacts on Korea’s trade with Japan in the short- and long-run. TWAMUGIZE et al (2017) findings revealed that the increase in exchange rate or devaluation of Rwandan currency is negatively related to exports while the increase in exchange rate indicates the negative effect on import in long-run. On the imports side, the results indicate the increase in exchange rate affect the level of import negatively. Therefore currency fluctuation has an adverse effect on both export and import flows in the long run. Leigh et al (2017) examined the relationship between exchange rate and trade prices and using the depreciation episodes, analyzed whether there is a stable relationship between export and exchange rate. There was limited evidence which supported the fact that exchange rate affects trade prices. After they studied the depreciation events of large currencies, they found out that a depreciation in exchange rate will mostly affect economies with economic slack.
On the other hand, some studies revealed that there exist a positive relationship between exchange rate fluctuation and international trade. Jiang (2014) Analyzed the RMB exchange rate volatility and China’s foreign trade situation. And also investigated the effect of nominal RMB exchange rate changes on import and export trade all sample data including the nominal exchange rate, the imports and the exports are from 1981 to 2012. At the same time, it combines China’s economic development status to discuss the effect of RMB exchange rate change on China’s overall economic development. Its result showed that the RMB nominal exchange rate fluctuation is the main factor that affects China’s imports and exports. In the long run, the rise of RMB exchange rate which means devaluation of RMB will have a positive effect on the foreign trade, and will also makes a significant growth on domestic import and export volume. Baek (2014) examined the effect of exchange rate fluctuations on the bilateral trade between Korea and the U.S by taking the roles of exchange rate volatility and third country effects into account. The dataset contains 86 quarterly observations for the period 1991:Q3 to 2012:Q4. The author found that Korea’s major export industries accounting for nearly 75% of total exports are highly responsive to the bilateral exchange rate, volatility and third country effects in both the long- and short-run. On the other hand, it is found that Korea’s imports are relatively insensitive in both the short- and long-run. Therefore depreciation of the Korean won (Japanese yen) could increase (decrease) the export volumes of Korea’s major products in the short- and long-run.
There is no harmony vis-à-vis the relationship between exchange rate volatility and international trade. Tenreyro (2007), Šimáková (2014), and Su (2017) showed international trade seems to be affected by other factors than development of exchange rates.
China’s trade patterns with African countries are rooted in powerful market dynamics only partially created by government policies. It’s almost entirely determined by its comparative advantage in labor-intensive and capital-intensive production EISENMAN (2012). China has contributed to African economic growth both positively and negatively.
Zafar (2007) scrutinized the main trade, investment, and aid links between China and Sub-Saharan Africa and assesses the principal dynamics of the relationship. It also examines the indirect macroeconomic effects of China’s policies on Africa, particularly in relation to global output, savings, and commodity prices using data from 1990-2006. China has contributed to African economic growth both positively and negatively. Positively, China has helped accelerate economic growth in Africa by contributing to a strong commodity boom due to the upward swing in the prices of oil and metals exported by many African economies. Second, it has deepened trade and investment on a continent that has been marginalized from flows of international trade and global capital, and China is investing significantly in Africa’s transport and education infrastructure. Third, it has given many Africans access to low-cost consumer goods. Fourth, China’s low-transactions–cost way of doing business and its noninterference in countries’ internal affairs. Fifth, China’s ascent has created more competition in the aid market and increased countries’ bargaining power with donors. Challenges and risks. First, there is some concern that Chinese investment in Africa will be based on capital-intensive natural resource extraction and will not contribute to local employment generation and the continent’s long-term economic development. Second, China’s influence on global energy demand and on oil markets has led to increased energy prices for net oil importers in Africa and a worsening of their terms of trade. Third, the supply shock to world manufacturing, particularly in textiles, and the growing imports of cheap Chinese goods in Africa, coupled with increasing competition between Chinese and African textiles in third-country markets, threaten to hinder economic diversification in Africa and contribute to deindustrialization. Fourth, important issues like corruption and governance, which had moved to the forefront of the development agenda, may slide back down again. Meyersson et al (2008) analyze the causal impact of China’s rising demand for natural resources (NR) on Sub-Saharan African political and economic development the matched data set contains data for 44 sub-Saharan African countries over 17 years (1990-2006). Found that exporting NR to China is unique in having large positive effects on economic growth and investment, but is not alone in its detrimental effects on human rights. Exporting NR to China also increases capital formation, investment in value added industries, and decreases labor force participation. Second, exporting NR to China worsens internal conflict and has adverse effects on human rights. The results were compared to the effects of exporting NR to the U.S. and exporting to India, respectively. We found that exporting NR overall had no effect on economic growth but had potentially negative effects on political institutions. Giovannetti and Sanfilippo (2009) measured the indirect impact of China on African exports to its main trading partners, US and EU, and to other African countries Using disaggregated data for the period 1995-2005. The results showed that Chinese exports had a significant and negative impact on African exports to main trade partners as well as inside Africa, where the demand for non-sophisticated low quality goods is expected to be high. Baliamoune -Lutz (2010) analyzed the growth effects of Africa’s trade with China, distinguishing between the effect of imports and the effect of exports, and controlling for the role of export concentration using Arellano-Bond GMM-DIF estimations and panel data over the period 1995-2008. The results suggest that export concentration enhances the growth effects of exporting to China, implying that African countries exporting primary products to China benefit more in terms of growth than do countries that have more diversified exports. And that imports from China have a positive effect on African growth, contradicting the wide held belief of resource curse and displacement effects. Weisbrod and Whalley (2011) used the Solow growth accounting methods to assess the incremental impact of Chinese inward FDI inflows to Africa, especially in the three years 2005 to 2007 before the financial crisis. Their results suggest that a significant portion of the accelerated growth in some African countries in the years immediately before and after the financial crisis can be attributed to Chinese FDI inflows. GUILLAUMONT and HUA (2013) Analyze the role played by the bilateral real exchange rates between China and African countries in the growth of their bilateral trade and also the determinants of the specific changes in the real bilateral exchange rates of African countries relative to China using panel data for 49 African countries over the period 2000 to 2011. The result shows that China’s exports of manufactured goods to Africa, contrary to its imports of raw materials, are significantly influenced by the real bilateral exchange rates. The real appreciation of African currencies stimulates China’s exports of manufactured goods. Busse et al (2015) investigated how Chinese trade, FDI and aid in Africa affect African economic growth using a Solow-type growth model and panel data for the period 1991 to 2011 and two with sample consisting of 43 sub-Saharan African countries. Result shows African imports from China, particularly non-resource imports, have a negative impact on economic growth in Africa. African exports to the world (excluding China) are positively associated with growth in Africa. Also African economies that export natural resources benefit from China’s rising demand for raw materials due to both positive changes in their terms-of-trade and increasing exports of natural resources to China. GUILLAUMONT and HUA (2016) Study the impact of China’s competition on the manufacturing added value of African countries using panel data on 44 African countries covering the period 2000 to 2013. Found that the imports of manufactured goods from China by African countries exert a negative effect on their manufacturing and that a moderate real appreciation of their currencies relative to the renminbi has a positive effect, although it also increases their imports from China and raises the cost of labor. Huang et al (2017) suggested that the import of resources should not be considered a-priori a load on a country’s economy, in that the economic performance is supported by the availability of high quality resources. What is important in bilateral and global trade is that a country is capable of securing sufficient primary energy sources to support its economic processes.
CHINA IMPACT ON CAMEROON
Some authors suggested that more trade openness can impact the economy positively. First and foremost, an increase in trade may encourage specialization in the production of export products, which in turn may enhancement the productivity level and lead to a rise in skills. Therefore leading to a reallocation of resources from the inefficient non-trade sector to the higher productive export sector. Change in productivity may lead to output growth. Weng et al (2017) stated that China’s new priority in investing in Africa is shifting away from traditional extractive industry investment towards investments in finance, infrastructure and manufacturing.
Aninpah and Menjo (2008) examined the nature of the economic relations between China and Cameroon especially with regards to trade, investment and aid flow. Chinese private investors have brought some benefits to the Cameroonian economy. They have increased the stock of capital goods through cheap capital imports from China. They have equally increased the production of goods and services at lower costs like construction of the road in Douala which has greatly improved circulation in that neighborhood. Although the PRC’s recent partnership with Cameroon is portrayed as “among the most steadfast and faithful” (Cameroon Tribune 2011 cited in Cabestan, 2015), it is no longer just about trade or about providing infrastructure with associated benefits: it is also about getting an own share of Cameroon’s natural resources to feed Chinese industries back home (Nguepjouo – 2017) .There is need for Cameroon to consistently assess its relationship with China so as to minimize the risk and exploit the advantages. Trade, investment and aid from China are good for Cameroon’s development, but good policies and better management (good governance) have also been shown to be important and should not be neglected in China’s cooperation with Cameroon. Based on Aninpah et al (2009) an expansion in trade (especially exports) may promote specialization in the production of export products, which in turn may boost the productivity level and may cause the general level of skills to rise. This may then lead to a reallocation of resources from the (relatively) inefficient non-trade sector to the higher productive export sector. They examined the key features of trade with China and assess its impact on the Cameroonian economy and stated that Chinese goods are having a positive impact on consumers, especially those at the lower strata in the distribution of income. Imported motorcycles from China are found to be complementing the production of taxi services in the main cities. Although there is insecurity, environmental and spare-part-intensity concerns, Chinese bikes are increasing the supply of taxi services, creating jobs, and generating government revenue. They went further to explain that Cameroon trade with China has increased considerably over the past few years. This has however been due to a surge in imports from China, while exports are declining. Cameroon has been running a large trade deficit with China. Imports from China are providing cheap and diverse consumption and capital goods, though issues of quality abound. Exports to China are limited to a few primary products, essentially cotton and wood products. Imports on the other hand are made up of a large variety of essentially manufactured goods. This raises the risk of undermining the industrial sector and locking Cameroon in primary activities. Exports in Cameroon are only fairly diversified and that export diversification positively and significantly affects economic growth in Cameroon. Labor productivity and investment also positively affects economic growth while external debt and balance of payments show a negative relationship with economic growth (Njimanted et al – 2014).
Conceptual framework; International trade and Exchange rate.
International trade is the exchange of capital, goods, and services across international borders or territories. This type of trade gives rise to a world economy, in which prices, or supply and demand, affect and are affected by global events. In most countries, such trade represents a significant share of gross domestic product (GDP).
While international trade has existed throughout history its economic, social, and political importance has been on the rise in recent centuries. (Ortiz and Max, 2017) After a long period characterized by insistently low international trade, over the course of the 19th century, technological advances triggered a period of marked growth in world trade (the ‘first wave of globalization’). During the interwar period, the growth slowed down, but started growing again during the Second World War, and in the last decades, it has been faster than ever before. Transport and communication costs have decreased across the world in the last couple of decades, and preferential trade agreements have become more common, especially among developing countries. Today, total trade across nations is higher than 50% of global production. At the turn of the 19th century this figure was below 10%.
In 2017, world trade was $34 trillion. That’s $17 trillion in exports plus $17 trillion in imports. In the same year global trade grew 10.5 percent reduced by 2 percent in 2016. International trade contributes about 27 percent to the global economy. Until the 2008 financial crisis, world trade grew 1.9 times faster than economic growth. Until 2017, trade grew more slowly than the global economy. In 2015 the 5 largest countries by total international trade of good and services ($ billions) are; United States (4,921), china (4,342), Germany (2,966), japan (1,602) and United Kingdom (1,565). One-quarter of trade was in electrical machinery, computers, nuclear reactor parts, and scientific instruments The top 5 traded commodities ($ billions) are, mineral fuels, oil, distillation products (2,183), Electrical, electronic equipment (1,833), machinery, nuclear reactors boilers (1,763), vehicles other than railways (1,076) and plastics and articles thereof (470). The 5 Most traded export products globally ($billions) are crude oil (786.3), cars (672.9), processed petroleum oils (605.9), phone system devices (532.2) and integrated circuits (516.7). Automotive contributed 9 percent. Commodities like oil, iron and diamonds added 19 percent. There are four essential reasons for the recent global trade slowdown.
Primary, the Soviet Union collapsed in the 1990s. Allowing countries like Poland, the Czech Republic, and East Germany to catch up as they rejoined the global economy.
Secondly, China joined the World Trade Organization in 2001. Due to these two events, the growth was super-charged but their contributions have stabilized after 15 years.
Third, the 2008 financial crisis slowed trade and growth. Many companies became more alert. Consumers were less likely to spend. Mostly because they’d grown older. They had to rebuild their retirement savings. Younger people faced high unemployment rates. They had a hard time getting their career started. That meant they weren’t as likely to marry and buy homes. Many of them also had large school loans to pay off.
Last but not the least, most countries implemented more protective measures. In 2015, governments quietly added 539 trade restrictions. These included tariffs, government subsidies to domestic industries and anti-dumping legislation.
3.1 Data collection method: Primary and Secondary sources.
The data collected were through primary source. The researcher issued questionnaires to respondents to get information. Interviewing was also used in some cases where the respondents were too busy to answer the questions issued in the questionnaire. The researcher therefore applied observation in order to collect information. Through the secondary source, I collected information by reading and extracting material from text books, websites, journals and past reports in re;ation to international trade and exchange rates.
China-Cameroon Trade Relations
Cameroon has been trading with China long before they established bilateral relations on March 26, 1971. Agreements signed by both countries include; A general trade agreement in 1972, An Agreement for the reciprocal protection and promotion of investments in 1997, An Agreement for Economic and Commercial Cooperation 2002, And a series of agreements in 2010. In 2017, China expressed its willingness to strengthen a sustainable bilateral relation with Cameroon. China had provided Cameroon with about US$100 million of economic aid in the two decades before 2005 and bilateral trade volume that year exceeded US$190 million (MAPPING CHINESE DEVELOPMENT ASSISTANCE IN AFRICA, 2011). Trade between the two countries stood at US$340 million from January to November 2006, representing an increase of 101% compared to the same period in 2005 (Aninpah, 2009). The year of 2015 saw the total trade value between China and Cameroon reached US$1,173million. In this section, we describe the nature and extent of trade links between Cameroon and China, comparatively with other major trading partners.
Exports to china
Cameroon exports to china has being relatively low prior to 2006, but shot up more than 200% within two years to stand at more than US$498 million in 2008. Exports to China represented almost 8.6% of total exports from Cameroon, up from barely 3% in 2006. China was ranked 4th among Cameroon’s export destinations in 2008. This was however going to be the peak of Cameroon exports to china as they took a downward trend from then forward. By 2013 exports to china declined to barely US$340 million, representing about 7.5% of Cameroon’s total exports. China fell to the 4th position among Cameroon’s export partners. This was because Cameroon’s export to the World decreased from US$5170 million in 2012 to US$4570 million in 2013. Exports to china are shown on the table below.
Table 3.1 Export to China, Share and Rank among Major Export Destinations (million US$)
Year China World China’s share (%) China’s Rank
2006 139 4700 3 9
2007 138 5500 2.5 8
2008 498 5820 8.6 4
2009 384 3790 10 4
2010 416 4870 8.5 4
2011 586 5020 12 2
2012 733 5170 14 1
2013 340 4570 7.5 4
2014 721 5880 12 2
2015 679 4730 14 1
Source: BACI International Trade Database
The scrutiny of the structure of Cameroon’s exports to China indicate that they are limited to a few raw materials. These include crude petroleum, wood and cotton. The export of crude petroleum represents an average of more than 50% of export income from China. From the year 2003-2007, China didn’t export any crude petroleum. This might be attributed to declining oil production in Cameroon that made the quantity available to the Chinese too small to be transported economically to China. Most of Cameroon’s oil is exported following long-term agreements. The Chinese then decided to turn to other countries where they can have oil in reasonable quantities. Beginning in 2004, raw cotton became the principal export commodity to China, representing about 75% of all exports to this country. China bought about 21% of Cameroon’s total crude petroleum and 32% of Cameroon’s total cotton exports in 2015.
In 2006, the export of rough wood and wood-related products to China represented 10.5% of total exports of the commodity by Cameroon. By 2015, this share had increased to almost 32%. In terms of total exports to China, the share of cotton decreased from 66.5% to about 32.4% in
2006 and 2015 respectively. The substantial increase in relative terms is largely attributable to increasing total exports to China, and not to a significant increase in wood exports to China.
Therefore, as per 2008, Cameroon started exported crude oil and some other products to China.
Table 3.2 China’s share of Cameroon’s exports by commodity groups (million US$)
Commodity Groups 2006 2015
China World China’s share China World China’s share
Crude materials except food/fuel 136.03 667 20.39 311.8 974 32.01
Raw cotton 77.8 117 66.49 60.4 186 32.47
Rough wood & products 58.23 550 10.58 251.4 788 31.90
Mining 0.00 2370 0 351 1680 20.89
Oil 0.00 2370 0 351 1680 20.89
Remaining Exports 2.97 —– —– 16.2 —- —-
Source: BACI International Trade Database
The pie charts below vividly show the evolution of the composition of Cameroon’s exports to China between 2006 and 2015. It clearly indicates how the structure of Cameroon’s exports changed, how Cameroon started exporting crude petroleum to china again. The fact is that Cameroon exports essentially only three primary commodities to China. This is definitely unsatisfactory for a country with enormous endowments and natural comparative advantage in the production of a cross-section of agricultural commodities required by China. In 2006 china had the 9th position among Cameroon trading partners, but it found its way up to the 1st position in 2015. For the 4-year period 2012-15, Cameroon’s main export partners have been China (11.9%), Spain (10.8%), India (8.8%), Netherlands (8.3%) and France (6.2%). Over the same period, exports to China averaged only 3.5% annually. More than two-fifths of Cameroon’s exports are to the EU, while 38% goes to Asia
Such export performance is encouraging, as the indication is that Cameroon has started reaping from the huge demand for raw materials by China. It also represents more opportunities for increasing exports to China. First, by increasing oil, wood and cotton exports, and then exploring the possibility of diversifying exports to other raw materials produced in Cameroon like cocoa, coffee, Banana, etc. and for which the enormous potentials widely remain untapped because of lack of agricultural intensification. Cameroon has started exporting some commodities on high demand like crude oil, and counting on exporting other commodities like non-petroleum minerals and metals to China.
Figure 1: Composition of Cameroon’s Exports to China in 2006 and 2015
Imports from China
Imports from China have been on a steady rise. In 2015, Cameroon imported goods from China worth more than US$137 billion, up from barely US$221 million in 2006. China’s share of total imports to Cameroon consequently moved from just 6.3% to 22% and China became Cameroon’s first source of imports followed by France and Nigeria, up from the third position in 2006. While Cameroon’s total imports increased by 180% between 2006 and 2015, imports from
China increased by 620%.
Table 3.3 Share of Imports from China, and Rank among Major Import Sources (million US$)
Year China World China’s Share (%) China’s Rank
2006 221 3510 6.3 3
2007 326 4880 6.7 3
2008 418 4470 9.4 2
2009 467 4550 10 3
2010 583 5370 10 3
2011 770 5940 13 2
2012 738 6700 11 3
2013 1510 7510 20 1
2014 1530 8050 19 1
2015 1370 6350 22 1
Source: BACI International Trade Database
While exports to China are intense on principally three commodities, imports from China cover a wide range of products. Before 2003, cereals (and especially rice) were the main import commodities, taking almost 50% of all imports. However, cereal imports from China started declining as Cameroon diversified her import sources to countries like Thailand, India and France. By 2009, cereal imports from China had dropped to barely US$0.5 million, down from almost US$31 million in 2002. Thailand has become the main source of cereals with US$186 million in 2015, and India with US$46.9 million, Vietnam with US$15.2 million and Pakistan with US$14.9 million. The share of food imports (essentially cereal) from China consequently declined from 9.8% in 2006 to zero in 2015. Cameroon has creditable potential in developing and intensifying the production of high quality rice domestically if the sub-sector is modernized Such a move can register substantial savings in foreign exchange earnings and even make Cameroon an important source of high quality rice to the sub-regional markets, Chad, Central African Republic and Nigeria.
With the far-reaching decline in the import of cereals, imports from China are now largely made up of machines. This commodity group (other manufactured products) represented 24% of all imports from China in 2015, and about 16% of that category of imports from the world, up from 16% in 2006. Another commodity group with significant increase of imports from China is metal. This commodity group of import from world increased from 5% in 2006 to 7% in 2015. But in 2006 10.3% of this commodity group were imported from China, but by 2015, this had risen to more than 18%. As a share of imports from China, the machinery, transport and other equipment group decreased from 12.6% to 9.3% between 2006 and 2015. Most of these commodities were previously imported from Western countries, and especially Europe. Table A2 in the appendix provides more details on imports from China for the year 2006 and 2015.
Table 3.4 China’s share of Imports to Cameroon by Commodity Groups (million US$)
Commodity Groups 2006 2015
China World China’s Share % China World China’s Share %
Food (especially Cereals) 22.3 254 8.7 5.78 525 1.1
Machines 34.5 433 7.9 331 1010 32.7
Metal 23.4 188 12.4 24.8 137 18.1
Textile 18.4 119 15.5 137 297 46.1
Transport and other equipment 27.9 459 6 128 455 28.1
Chemical Products 13.3 366 3.6 101 739 13.6
Footwear & Headwear 14.9 26.4 56.4 76.2 88.2 86.4
Plastic & rubber material 18.6 139 13.4 73.8 270 17.3
Mineral Products 7.1 1010 0.7 53.8 1280 0.4
Stone and Glass 13.6 33.2 41 69.7 103 67.6
Other products 27 —- —- 368.92 —- —-
Source: BACI International Trade Database
To better appreciate the evolution of the structure of imports, we use pie charts to illustrate the commodity groups in 2006 and 2015. Significant changes are recorded for the pies for cereals, metal, machinery, transport and other equipment, plastic and rubber products and other manufactured products as already indicated above. This is evidence of the increasing diversification of imports from China, especially as each of these commodity groups is an aggregation of several other products.
None of Cameroon’s traditional trading partners witnessed an increase in exports to Cameroon like China. Between 2013 and 2015, they all lost import shares in Cameroon while the share of Chinese goods to Cameroon increased by almost 50% in this same period. The rapidly rising share of imports from China means a reduction of imports from some of Cameroon’s traditional partners. Imports from the EU are high, but declining, while those from East Asia are booming, but increasing steadily. Imports from North America are relatively low while those from Africa are rising, but largely dominated by crude oil imports from Nigeria.
Figure 2 Composition of Cameroon’s Imports from China in 2006 and 2015
Trade Balance with China and exchange rate
Trade between these two countries consist mainly of Cameroon exporting raw materials to China with little imports from China. Cameroon therefore, has practically not enjoyed any favorable trade balance with China for the past years. Indeed, Cameroon’s exports to China peaked in 2012 declined in 2013 and picked up again in 2014, while imports from China on the contrary have been on a steady rise and boomed in 2013. Cameroon has basically not enjoyed any trade surplus with China except in 2008 while the rest of the years have had trade deficit. (See Figure 3 and Table 3.5).
Export and import shares (Tables 3.5) confirm the increasing trend of Cameroon imports from China and also increasing trend of exports to China. In 2006, exports to China represented 3% of total exports from Cameroon, and by 2015, exports to China enlarged to 14% of total exports. On the other hand, the share of imports from China in total imports has been on the rise. From 6.5% in 2006, it reached 22% in 2015. In terms of ranking sources of Cameroon’s imports, China moved rapidly from the 3th position in 2006 and has maintained the first position since 2013. With regards to Cameroon’s export destinations, China strived from the 9th to first position between 2006 and 2015.
Table 3.5 Trade balance with China (value in million US$)
Year Export Import Trade balance Exchange rates
Value China’s share % Rank Value China’s share % Rank Value RMB/FCFA
2006 139 3 9 221 6.5 3 -82 68.94
2007 138 2.5 8 326 6.7 3 -188 62.98
2008 498 8.6 4 418 9.4 2 80 64.43
2009 384 10 4 467 10 3 -83 69.13
2010 416 8.5 4 582 10 3 -166 73.16
2011 586 12 2 770 13 2 -184 73.04
2012 733 14 1 738 11 3 -5 80.53
2013 340 7.4 4 1510 20 1 -1170 79.68
2014 721 12 2 1530 19 1 -809 80.52
2015 679 14 1 1370 22 1 -691 94.94
Source: BACI International Trade Database and international financial statistics (IFS)
Over the past few years, Cameroon has being on a significant trade deficit with china. Nevertheless, Cameroon overall trade deficit cannot be solely attributed to china alone. Its balance with France, Nigeria, and United States has been negative for several years now. Cameroon has a consistent trade surplus with other EU countries like Spain, Italy and Portugal. The deficit with France has been declining, while that with China is on the rise, and a reflection of the widening trade deficit with East Asian countries.
The actual picture could be worst, if we factor-in the observation that some made-in-China goods are imported from third countries. An example is the rising imports from the United Arab
Emirates (Dubai). Imports from this country rose from about US$27.7 million in 2010 to more than US$60.8 million in 2015. It pointed out that Cameroon exports practically nothing to the United Arab Emirates. The smuggling of fake products such as drugs (pharmaceutical products) from China and India coming through Nigeria has also been mentioned as a growing concern.
This trade is very much modelled on the North–South structure, as China buys raw materials and sells manufacturing and consumption products. The dangers of this growing pattern of trade between China and Cameroon (i.e. exporting only primary and importing manufactured products) is that it can lock the Cameroonian economy in the primary sector. Thanks to the cheap imports of products such as ceramics and shoes competing with the locals, the industrial sector are being destroyed while the primary sector are expanding as a result of the rising demand from China. If this matter not well handled, the economy will be locked in the production of primary products the prospects of industrialization will be destroyed.
Concentrating in the production of non-oil primary products is, however, not necessarily welfare constraining. Efficient production of these commodities can indeed spur growth and the eventual development of the industrial sector. Moreover, no country in the world gifted with agricultural potentials appears to have ever developed or modernized without structurally transforming its agriculture to reach the takeoff point. This study recognizes that rationalization of the process of reaping benefits and checking losses emanating from trade relations with China lies with agricultural modernization.
On the other hand, Cameroonians are benefiting from increased Chinese aid, including debt relief that has led to more investments in human capital, with a potential impact on growth and poverty reduction. More and cheaper Financing for Development (FfD) resources are being provided to Cameroon by china. Thanks to Chinese concrete and visibility infrastructure projects, common Cameroonian citizens see it as a better assistance, safe from possible embezzlement by some bureaucrats as in the case of Western aid
Sample and Sampling Techniques4. EMPIRICAL ANALYSIS
4.1. Impact of Trade with China
4.1.2. Impact on exports of primary commodities to China
Trade with China can equally impact Cameroon through its exports. The petroleum sector, Agriculture and forestry remain Cameroon’s leading economic activities, accounting for more than 50% of GDP and providing employment for about 60% of the population. As indicated above, Cameroon now exports mainly only three commodities to China: crude petroleum, cotton and wood. In 2013, Cameroon export of crude oil to China dropped drastically from US$419 million in 2012 to about US$ 0.3 million and picked up again to US$ 457 million in 2014 representing almost 63% of total export to china. While wood represented 26.5% and cotton 8.9%. Oil, cotton and wood exports differently affect the development and income distribution within a country. Revenue from wood is concentrated in a few firms, and the oil and wood industry employs fewer people than the cotton industry. Cotton production is the responsibility of the smaller and generally poorer farmers, and better returns to this commodity are likely to make a large and direct positive impact on poverty alleviation (Aninpah et al, 2009)
Oil-related activities account for around 5.5% of GDP and 35% of exports; other mineral deposits in Cameroon remain largely unexploited. The late 1980’s were a boom time for Cameroon, whose producers increased daily output to more than 180,000 barrels a day. But technical setbacks and maturing fields forced Cameroon to cut production, leading to historically low output of 75,000 barrels a day in the late 2000’s. In the high-price environment of the late 2000’s and early 2010’s, Cameroon saw an opportunity to increase production and invested heavily in the development of new fields, attracting foreign capital and expertise from Russia’s Lukoil, China’s Addax, and France’s Total, while opening up concessions in Dissoni, Padouk, Barombi and other fields as recently as last year. In 2011 China became the second largest oil producer in Cameroon. China’s reputation in Cameroon’s oil production occurred after China Petroleum and Chemical Corporation (Sinopec) acquired 80 percent of the shares previously held by Shell in Pecten Cameroon Company controlled by the Addax Company, with Cameroon’s National Hydrocarbons Corporation (SNH) holding the remaining 20 percent of shares (Daly, 2012).
But unlike many other African countries, Beijing apparently sees its predominant position in Cameroon as less than solid. China and France are Cameroon’s main trading partners, but the United States is a leading investor in Cameroon, largely through the Chad-Cameroon pipeline.
In 2014 price drop caught Cameroon’s producers by surprise, and now Cameroon is poised to produce at historic highs while the price of oil plummets to historic lows. Cameroon and its oil producers are faced with only two options: firstly, they can heed the long-term incentive by reducing output and preserving mature fields, but this means foregoing returns on massive investments and sacrificing government income, or they can rather heed the short-term incentive and increase production to make up for the lower oil prices. And while Cameroon seems to have chosen the latter option, increasing production by 17 percent since 2014, it’s not enough to make up for the millions of dollars in lost revenue (Molina, 2015). According to press reports, China recently became the number one importer of Cameroonian exports, especially crude oil and unprocessed timber.
China has come under biting criticism as a nation playing a key role in fueling the flow of illicit global timber trade. The Asian country imports huge volumes from Cameroon, one of many countries which supplies raw timber from its tropical rainforests, yet Cameroon seems to gain little from this transaction. China is the leading importer of Cameroon’s illegal timber; Cameroon’s timber exports to China increased from 29% to 65% between 2003 and 2009. The timber trade between China and Cameroon has nevertheless brought some economic benefits to rural communities but it still suffers severe sustainability consequences. Chinese assistance has been accused of forest destruction, because logs exported to China are being exaggerated. Actually, Chinese log importers pay less attention to the size of the logs. As a result, in order to meet to the Chinese demand, even very young and immature trees are cut down leading to environmental degradation. Cameroon exported 58 percent of its wood products to China in 2013, because during this year only 2 products were mainly exported (wood and cotton). Wood products accounted for 37 per cent of export earnings in 2015, in second place after oil. Output fell to an estimated 2,250,482 cubic meters sawn in 2015, down from 2,750,336 cubic meters in 2014, mainly due to a drop in the number of active forestry concessions (down from 77 to 69).
For cotton, its cultivation in Cameroon is overseen by a government parastatal – SODECOTON13 which provides seeds and other inputs to the farmers and consequently buys all the output at pre-determined prices. The international price of cotton (Cameroon’s main export to China) has been falling and SODECOTON (Société de développement du Coton) has consequently been paying lower farm gate prices to cotton growers. Cameroon’s economy is highly dependent on commodity exports. The bulk of Cameroon’s cotton is exported to China and Europe, while about 10% is consumed locally, according to data from the state-run corporation. In 2013, Commodafrica’s statistics revealed that Cameroon exported 66,000 tons of cotton, which is 7.3% downturn relative to 2012. Exports however represent 32% of Cameroon’s GDP as SODECOTON announced 210,000 tones as its overall production for the last cotton season.
But despite this dip in cotton exports to China, Cameroon is still the Asian country’s number two cotton supplier after Burkina-Faso which also experienced a 2.4% decline in exports to China in 2013, amounting to 95,000 tones.
Over the first two months of 2014, China (country holding 70% of world market) cotton imports declined by 35%. This downward turn affected all cotton producers Cameroon included which exported only 325 tones during that period and represented a 26% decrease compared to the same period the previous year. It is noted that China represents about 70% of the global cotton market.
All sectors in the Cameroonian economy suffer from economic crisis and severity measures. For a country like Cameroon being among the HIPC (heavily indebted poor countries), It is equally well-known that helping all sectors to grow at the same time is costly because of its budgetary constraints. Therefore, if there is an increases in demand (both intermediate and final) in some sectors, it can equally benefit other sectors as well since they are all linked. Hence, to stimulate output growth and take advantage of the growing Chinese market, it could be sufficient for the government to push or support just an “optimal mix” of strategically selected agricultural sub-sectors, which in turn will help other sectors to grow (Aninpah et al, 2009).
Alessandro Nicita (2013), Exchange Rates, International Trade and Trade Policies. Policy Issues in International Trade and Commodities Study Series No. 56
Ali Zafar (2007), The Growing Relationship Between China and Sub-Saharan Africa: Macroeconomic, Trade, Investment, and Aid Links. World Bank Research Observer, 22 (1): 103–130.
Aninpah, K. and Menjo, B. (2008), China-Africa Economic Relations: The case of Cameroon. Scoping Study for the African Economic Research Consortium (AERC) project,
Aninpah, K., Menjo, B. and Godwill K. (2009), The Impact of China-Africa Trade Relations: The case of Cameroon. Scoping Study for the African Economic Research Consortium (AERC) project,
Anu Nkeze, P. and Azore Opio (2015), China Fuels Illegal Exports Of Cameroon Timber (the green vision)
https://www.greenvision.news/china-fuels-illegal-exports-of-cameroon-timber/Asongne Ngufor Benis (2017), Impact of Chinese Investment in Cameroon. International Journal of Humanities and Social Science Vol. 7, No. 2; February 2017 (104-108)
Busse, M., Erdogan, C. and Mühlen, H. (2015), China’s Impact on Africa – The Role of Trade and FDI
Casanova, C. and García-Herrero, A. (2016), Africa’s rising commodity export dependency on China
International Monetary Fund Working Paper 16/09
Clark, P., Tamirisa, N. and Shang-Jin, W., with Sadikov, A. and Zeng, L., (2004), Exchange Rate Volatility and Trade Flows – Some New Evidence. International Monetary Fund
Diderot Nguepjouo (2017), The spatialization of China’s presence in Cameroon: The case of the mining sector. The Extractive Industries and Society 4 (2017) 513–524
Elif Guneren, G. and Oksan, K. (2014), The Effect Of Exchange Rates On Exports And Imports Of Emerging Countries. European Scientific Journal May 2014 edition vol.10, No.13 ISSN: 1857 – 7881 (Print) e – ISSN 1857- 7431
GIOVANNI DELL’ARICCIA (1999), Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union. IMF Staff Papers, Vol. 46, No. 3 (September/December 1999), 1999 International Monetary Fund
Giovannetti, G. and Sanfilippo, M. (2009), Do Chinese Exports Crowd-Out African Goods? An econometric analysis by country and sector. European Journal of Development Research Special Issue, Vol. 24, No. 1,
Gonzalo Molina (2015), Cameroon Ramping Up Oil Production as Prices Moving Down
https://oilprice.com/Energy/Oil-Prices/Cameroon-Ramping-Up-Oil-Production-As-Prices-Moving-Down.htmlGUILLAUMONT, J. and HUA, P. (2013), China’s African financial engagement, real exchange rates and trade between China and Africa.
Work was supported by the Agence Nationale de la Recherche of the French government through the program “Investissements d’avenir ” ANR-10-LABX-14-01″ and by La Fondation pour les Etudes et Recherches sur le Développement International (Ferdi).
GUILLAUMONT, J. and HUA, P. (2016), Impact of Chinese competition on Africa’s manufacturing
Work was supported by the Agence Nationale de la Recherche of the French government through the program “Investissements d’avenir ” ANR-10-LABX-14-01″ and by La Fondation pour les Etudes et Recherches sur le Développement International (Ferdi).
Huchet-Bourdon, M. and J. Korinek (2011), To What Extent Do Exchange Rates and their Volatility Affect Trade? OECD Trade Policy Papers, No. 119, OECD Publishing, Paris.
Jana Šimáková (2014), The impact of exchange rate development on Czech trade flows.
Elsevier B.V Procedia Economics and Finance 15 (2014) 129 – 136
Jansson, J., (2009). Patterns of Chinese Investment, Aid and Trade in Central Africa. (Cameroon, the DRC and Gabon). Centre for Chinese Studies, South Africa
John Daly (2012), Cameroon, West Africa’s Latest Oil Battleground
https://oilprice.com/Energy/Crude-Oil/Cameroon-West-Africas-Latest-Oil-Battleground.htmlJOSHUA EISENMAN (2012), China–Africa Trade Patterns: causes and consequences.
Journal of Contemporary China (2012), 21(77), September, 793–810
Jungho Baek (2013), Does the exchange rate matter to bilateral trade between Korea and Japan? Evidence from commodity trade data. Economic Modelling 30 (2013) 856–862
Jungho Baek (2014), Exchange rate effects on Korea–U.S. bilateral trade: A new look.
Research in Economics 68(2014)214–221
http://dx.doi.org/10.1016/j.rie.2014.05.002Leigh, D., Weicheng, L., Marcos, P., Rachel, S., Viktor, T. and Hong, Y., (2017) Exchange Rates and Trade: A Disconnect? International Monetary Fund WP/17/58
Lingfei, W., Jeffrey, A. and Lan, X. (2017), Will China redefine development patterns in Africa? Evidence from Cameroon. The Extractive Industries and Society 4 (2017) 506–512
Marquez, J. and Schindler, W. (2006), Exchange-Rate Effects on China’s Trade: An Interim Report
Federal Reserve Bank of San Francisco Working Paper 2006-41
http://www.frbsf.org/publications/economics/papers/2006/wp06-41bk.pdfMeyersson, E., Padró I, M. and Qian, N. (2008), The Rise of China and the Natural Resource Curse in Africa.London School of Economics and Political Science, Economic Organisation and Public Policy Programme,
Mina Baliamoune-Lutz (2010), Growth By Destination (Where You Export Matters): Trade With China And Growth In African Countries. International Centre for Economic Research Working Paper No. 22/2010
Njimanted, G., Molem, C. and Musomo, A. (2014), The Effects of Export Diversification on Economic Growth in Cameroon. International Invention Journal of Arts and Social Sciences (ISSN: 2408-7238) Vol. 1(3) pp. 54-69, December, 2014 Available online http://internationalinventjournals.org/journals/IIJASSOECD (Organization for Economic Co-operation and Development). (2005), Economic
Survey of China 2005: Key Challenges for the Chinese Economy. Paris.
Rodrik, D. (2006), What’s so special about China’s Exports? Faculty Research Working
Papers Series No. RWP06-001. John F Kennedy School of Management, Harvard University
SaangJoon BAAK (2008), The bilateral real exchange rates and trade between China and the U.S.
China Economic Review 19 (2008) 117–127
Senge, G. and Tasoh, M. (2016), The Effects of Global Financial Crisis on International Trade: Exchange Rate Volatility Vs Finance. Case of Cameroon
Sherzod Yarmukhamedov (2007), Trade Effects of Exchange Rate Fluctuations: Evidence from Sweden
Shupei, H., Haizhong, A., Viglia, S., Buonocore, E., Wei, F. and Ulgiati, S. (2017),
Revisiting China-Africa trade from an environmental perspective,
Silvana Tenreyro (2007), The trade impact of nominal exchange rate volatility. Journal of Development Economics 82 (2007) 485–508
TWAMUGIZE, G., Xuegong, Z. and Abeid, A. (2017), The Effect of Exchange Rate Fluctuation on International Trade in Rwanda. IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 8, Issue 3 Ver. II (May – June 2017), PP 82-91
www.iosrjournals.orgWanhui Jiang (2014), The Effect of RMB Exchange Rate Volatility on Import and Export Trade in China. International Journal of Academic Research in Business and Social Sciences, January 2014, Vol. 4, No. 1
Weisbrod, A. and Whalley, J. (2011) The Contribution of Chinese FDI to Africa’s Pre Crisis Growth Surge. NBER Working Paper No. 17544
http://www.nber.org/papers/w17544Weng, L., et al., (2015), Asian investment at artisanal and small-scale mines in rural
Cameroon. Extractive Ind. Soc. 2 (1), 64–72.
Xiaoyan Hou, (2014), The RMB Exchange Rate Fluctuations Impact on the Export of Labor-Intensive Industry Research. International Journal of Business and Social Science Vol. 5, No. 7; June 2014
Yutaka Kurihara (2013), Effects of Exchange Rate Fluctuations and Financial Development on International Trade: Recent Experience. Int.J.Buss.Mgt.Eco.Res., Vol 4(5), 2013, 793-801
Yuping Su (2017), An Empirical Analysis of the Impact of RMB Exchange Rate Fluctuation on Textile and Clothing Export of Guangdong. Chinese Studies, 2017, 6, 55-70