Download China and Nigeria

An old Nigerian proverb states
that "a man cannot sit down
alone to plan for prosperity"
China and Nigeria
Will Harford
1
Hypothesis
The strength of the unique relationship between China and Nigeria is a
consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
2
Contents
• Investigate the economic reasons for the relationship.
• Why is the relationship unique?
• What does this relationship mean in terms of the continued economic
growth of both countries?
3
China’s boost in the world of trade.
• The US, as a consequence of the LA Riot’s required an alternative
supply of low cost goods resulting in happier US consumers.
• 52 Deaths, 2,500 injuries, at least $446million to $1bn USD in property
damage.
• Deployment of 10,000 California National Guard Soldiers and more than
3,500 US soldiers and Marines.
• 12,111 arrests
• Protecting US jobs was no longer a requirement.
• In 1982, demand existed in the US for production that would lower
the consumer cost for basic items.
• This demand did not involve high technology
4
China’s boost in the world of trade.
• China’s large labour allowed them to respond to the demand for
cheap manufactured goods in the US.
• In 1992, China was not considered an HPAE
• GDP $422.7 billion
• Population of 1,165,000,000
• GDP per Capita $362.81
• In 2014, China has the second largest GDP in the world
• GDP $9.469 trillion
• Population of 1,357,380,000
• GDP per Capita $6,959
5
5
China’s boost in the world of trade.
China in 1992
China in 2014
• Solow Growth Model:
Y=f(K,L,T)
• China had large, underutilized
labour force
• Limited capital
• Limited Technology
• Solow Growth Model:
Y=f(K,L,T)
• China had large, better utilised
labour force
• Large capital
• Development of disruptive
technologies
6
6
Lets also consider China’s human capital
• ‘China's educational horizons are expanding. Ten years ago
the MBA was virtually unknown but by 2004 there were 47,000
MBAs, trained at 62 MBA schools. Many people also apply for
international professional qualifications, such as EMBA and MPA;
close to 10,000 MPA students are enrolled in 47 schools of higher
learning, including Peking University and Tsinghua University.’
• Limited information is available detailing Chinese education when
contrasted with other countries.
• Human Capital developed is different to other East Asian human
capital
7
7
China’s social capital
• Limited publicized conflict within the country suggesting a high level
of harmony.
• How can we tell : Confucian ethics promoted by Xi Haung promoting
the short text written by Li Yuxiu (around 1661-1722) titled, Di Zi Gui
• Xi Jinping recommended the text that promotes absolute compliance
with leaders.
• The World’s Most Popular Leader: China’s President Xi
8
8
China’s social capital
• Mao Zedong denounced Confucianism
• Hong Kong dissent
• After Deadly Riots, Ethnic Tensions Heat Up in Urumqi
• China Xinjiang riots toll 'rises to 35'
• A dangerous year: Economic conditions and social media are making
protests more common in China—at a delicate time for the country’s
rulers
• Up to 21 dead, doctor says, as anti-China riots spread in Vietnam
9
9
Is China approaching convergence?
• Yes, why because growth is slowing, resources are diminishing and
China is simply catching up.
• GDP=F(K,L); Capital grows with economy and Labour is expected to
slow.
• Growth Models
• Labour is expected to level out shortly, however there are numerous
countries supplying labour to china.
• Capital is available because of the limited expenditure required for a
production economy, rather, its saved/invested!
10
10
Now China needs something new!
• The paper ‘When Fast Growing Economies Slow Down: International
Evidence and Implications for China’ suggest’s China’s growth will begin to
slow in 2015. http://www.nber.org/papers/w16919.pdf
• China must advance to the next growth curve. So how do they do it?
• They must increase their Total Factor Productivity or TFP.
• As we approach convergence, China must consider methods to raise their
TFP as well as consider new methods that will allow them to continue on
the existing curve.
• Today, China now has reached the point where they must either accept
convergence or jump to a new curve with continued growth as a result.
• Like the US in 1992 China has a Demand, but what for?
11
11
China’s growing demand: Labour
• China’s working age population fell by 2.44 million to 919.54 million in
2013, marking the second consecutive year of decline, the National
Bureau of Statistics (NBS) reported.
• It noted that the number of migrant workers (living outside their
home province) increased by 3.4% last year.
• The income of migrant workers rose by 21.2% in 2012
• China’s labour force
12
12
China’s growing demand: Demand
• China is constantly searching for new markets that demonstrate a
demand for goods/services that it can supply.
• China's new tech rules play to local firms' strengths
13
13
China’s growing demand: Natural resources
• China’s access to Natural Resources is large for many items except
oil.
• As of 2010 China consumed 455 million tons oil of which over 200
million tons were imported. China's oil demand is expected to
increase by 6% in 2011 according to PetroChina. In 2013 the pace
of China's economic growth exceeded the domestic oil capacity and
floods damaged the nation's oil fields in the middle of the year.
Consequently, China imported oil to compensate for the supply
reduction and surpassed the US in September 2013 to become the
world's largest importer of oil.
http://en.wikipedia.org/wiki/Petroleum_industry_in_China
14
14
US in 1992 is similar to China
• The countries GDP can be increased with a larger workforce, greater
access to Oil or they could just increase their Productivity.
• How can China increase their TFP?
• We must consider Endogenous Growth Theories. Japan and Korea
demonstrated high growth levels with the following factors of TFP.
• Human Capital
• Education
• Social Capital
• Harmony, Law & Order, Lack of Corruption
• Government Policies
• Industrial Policy, Export Promotion
15
15
US in 1992 is similar to China
• Riots throughout China
http://www.cnbc.com/id/101918928
http://m.bbc.com/news/world-asia-china-26414016
http://www.forbes.com/sites/joelkotkin/2014/10/13/the-unrest-in-hong-kong-and-chinas-bigger-urban-crisis/
• The Chinese government must lower costs for its population.
16
16
China’s search for its new partner
• To supply its demand for labour, fulfil its demand for natural
resources and to introduce the products/services it provides to new
markets!
17
17
Sure China’s involved in trade with
lots of African nations.
GDP/Capita (USD)
2003
2013
Angola
920.10
5,783.37
Nigeria
510.42
3,005.51
South Africa
3,624.94
6,617.91
Angola
Nigeria
South Africa
Low Cost Natural
Resources (Oil)
2
1
3
Low Cost Labour
Yes
Yes
Yes, close to
China’s.
New Market (pop)
21.47m
173.6m
52.98m
18
18
Sure China’s involved in trade with
lots of African nations.
19
19
Labour Force
Population (2013)
Estimated 2050 (UN)
Estimated 2100 (UN)
Urbanisation
Average Age
TFR(2011,2013)
TFR(URBAN)
TFR(RURAL)
Language
Angola
21.47
South Africa
52.98
54%
Nigeria
173.6
440
914
50%
17.9(Median)
17.9
25(Median)
6.3
4.6
7.7
Portuguese
5.5
4.7
6.2
English
2.55 (2005-10)
62%
Zula
20
20
Africa
Nigeria
South Africa
Angola
Oil Reserves
37.2 billion barrels
0.15 billion barrels
10.5 billion barrels
Literacy Rate
68.00
86.40
67.40
GDP/Capital
$2,500
$10,700
$8,200
Corruption
27
43
19
• Large Supply of Natural Resources.
• Low cost manual labour.
• Requirement to work.
21
21
A Closer look at Nigeria
• Nigeria has the seventh largest population in the world.
• Largest population in sub-saharan Africa; 173.6m, almost 20% of Africa’s
population.
• 50.4% Islam, 48.2% Christianity of which 74% are Protestant and 25% are
Catholic
• According to a BBC world service poll, Nigeria is the most pro-Chinese
country in the world with 85% of the population recognizing China’s
influence as positive.
• Member of OPEC
• strong economic growth between 2003 and 2010 – averaging 7.6%
• Oil accounts for close to 90% of exports
22
22
Nigeria: Some numbers
http://data.worldbank.org/country/nigeria
23
23
Nigeria
• Remittances represented 6.7% of GDP in 2007
• Export more than 2.2m barrels/day
• Brain Drain – estimated 21,000 Nigerian doctors, in the US
• 100-188 million cubic feet of natural gas (largest in the world)
• 32-36bn barrels oils
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24
Nigerian Education
• Nigeria appears to be increasing its human capital
• The education system is divided into Kindergarten, primary
education, secondary education and tertiary education
• Attendence rate for secondard education is 29%
• 68% of the population is illiterate (75% of men and 60% of women).
• Female Literacy is less than 35% in Northern Nigeria and more than
90% in areas surrounding the southern delta.
25
25
Nigeria – Social Capital
• Nigeria ranks 54th with respect to the human poverty
index (HPI) - making it the 20th poorest country in the
world.
• It is also ranked 30th in gender related development index
(GDI) while occupying 40th position from below in its
human development index (HD1).
26
26
Nigeria – Frugality
• By 2004, the savings rate for Nigeria stood at 6.4
percent (Chinese savings rate is greater than 50%)
• GDP/Capita was $792 in 2009 according to MthembuSalter, Gregory. (2011).
• GDP/Capita is increasing at an increasing rate.
• According to the WorldBank, Nigeria’s Gini rating was in
the 4th quintile between 1995-1999.
What Drives Private Saving in Nigeria
27
27
Nigeria – Hard work
• 76.3% of the Nigerian Labour Force is employed.
• Unemployment rate is 8.5%
• Hard to find accurate means of measurement.
YOUTH AND LABOUR MARKET OUTCOMES IN
NIGERIA: EVIDENCE FROM NATIONAL LABOUR
MARKET SURVEY
28
28
Nigeria – Social Harmony
• Strict division between the north and the south
• Boko Haram, want to implement Sharia Law across Nigeria.
• Over 250 sub-ethnicities, speaking over 500 different languages
Boko Haram insurgency
Conflict in the Niger Delta
Boko Haram crisis: How have Nigeria's militants
become so strong?
29
29
Nigeria - Leadership
• Obasanjo left power in 1979 and Shehu Shagari became
President until 1983
• Shehu Shagari was deposed by Major-General Muhammadu
buhari until he was toppled two year later.
• Major-General Ibrahim Babangida then held power until it
was seized in 1993 by defence minister, Sani Abacha.
• Sani Abacha remained in power until his death in 1998
(apparently in company of two prostitutes).
• 2007: The first ever transfer of power between two civilians in
Nigeria’s post independence history. (although the results
were not endorsed by the EU or the US)
30
30
Nigeria - Leadership
• Dr. Oby Ezekwesili while speaking at the 42nd
convocation ceremony of the University of Nigeria
Nsukka (UNN) stated that $45 billion in foreign
reserves and $22 billion in the Excess Crude Account
were unaccounted for by the Yar’Adua-Jonathan
administration
• According to the Corruption Perception Index(CPI),
Nigeria ranked 136/175 with a CPI of 27/100 in 2014.
http://www.transparency.org/cpi2014/results
http://www.transparency.org/cpi2014/in_detail
31
31
What unique about it?
• According to a 2014 BBC World Service Poll, 85% of Nigerians view China's
influence positively, with only 10% expressing a negative view, making
Nigeria the most pro-Chinese nation in the world.
• Both nations also signed a USD311 million agreement to develop
cooperation in communications and space programs
• Nigeria’s abundance of natural resources and China’s demand for those
same resources.
• Nigeria’s high corruption, low beaurocratic quality and democratic
accountability. International Country Risk Guide (ICRG) (http://www.prsgroup.com/icrg.aspx)
• In 2006, China also agreed to grant a loan of $1 billion to Nigeria to help it
upgrade and modernize its railway networks.
• Nigeria received over half of all Chinese FDI flows to West Africa between
2004 and 2009. http://dspace.africaportal.org/jspui/bitstream/123456789/340
31/1/China%20Africa%20book%20(3).pdf?1 P234
32
What unique about it?
Nigerian Imports from China
Nigeria’s imports from China increased
consistently from $740.6 in 2002 to $7.32
billion in 2010
Nigeria imported more (relatively)
miscellaneous manufactured products,
such as footwear and related articles,
from China than the rest of the world
http://dspace.africaportal.org/jspui/bitstre
am/123456789/34031/1/China%20Africa%
20book%20(3).pdf?1
Product Label
2002
All Products
Electrical, electronic equipment
Vehicles other than railway, tramway
Machinery, nuclear reactors, boilers, etc
Articles of iron or steel
Rubber and articles thereof
Plastics and articles thereof
Aluminium and articles thereof
Ceramic products
Glass and glassware
Iron and steel
Optical, photo, medical, etc apparatus
Fish, crustaceans, invertebrates
Organic chemicals
Miscellaneous articles of base metal
Miscellaneous chemical products
Inorganic chemicals, metal compound
Tools, implements, etc of base metal
Paper & paperboard, paper and board
Furniture, prefabricated buildings
Stone, plaster, mica, etc articles
Salt, sulphur, earth, and cement
2003
2006
2008
2010
Value % of Value % of Value % of Value % of Value % of
US$
Total US$
Total US$
Total US$
Total US$
Total
740.6
100 1068
100 3161.1
100 4292.3
100 7324.4
100
105.2 14.2 137.9 12.9 489.8 15.5 743.1 17.3 1821.5 24.9
86.5 11.7 171.9 16.1
765 24.2 734.9 17.1 1451.4 19.8
99.3 13.4 255.8
24
431 13.6 814.8
19 1074 14.7
26.3
3.6 31.6
3 80.2
2.5 163.2
3.8 469.3
6.4
16.4
2.2 21.1
2 64.9
2.1 126.9
3 249.1
3.4
24.7
3.3
34
3.2 146.2
4.6 174.1
4.1 226.6
3.1
6.5
0.9
7.7
0.7 39.5
1.2
143
3.3 162.3
2.2
7.4
1 10.7
1 87.4
2.8 212.1
4.9 159.6
2.2
4.8
0.6
9.5
0.9 28.1
0.9 64.1
1.5 119.9
1.6
17.9
2.4 18.1
1.7 55.8
1.8 195.1
4.5 116.4
1.6
20.3
2.7 19.9
1.9 86.4
2.7 67.6
1.6 106.5
1.5
6
0.8 18.1
1.7 69.3
2.2 16.5
0.4 103.1
1.4
19.8
2.7 28.3
2.6 68.7
2.2 75.8
1.8 97.7
1.3
6.9
0.9
7.4
0.7 10.6
0.3 34.8
0.8 94.5
1.3
29.2
3.9 18.3
1.7 64.1
2 50.6
1.2 85.8
1.2
11.7
1.6 18.8
1.8 64.4
2 66.7
1.6 60.8
0.8
2.7
0.4
3.2
0.3
6.2
0.2 23.7
0.6 58.3
0.8
18.9
2.6
22
2.1 61.4
1.9 55.6
1.3 53.5
0.7
7.1
1
9.9
0.9 21.3
0.7
26
0.6 52.7
0.7
2.1
0.3
1.9
0.2
7.8
0.2 14.6
0.3 44.4
0.6
6.9
0.9 25.3
2.4 32.8
1 76.4
1.8 43.4
0.6
Source: International Trade Centre (ITC) Data Base (http://www.trademap.org Bilateral_TS.aspx)
33
What unique about it?
Chinese imports from Nigeria
Nigeria’s export to China followed the
increased trend, although in a relatively
moderate way, rising from $73.2 million
in 2002 to about $1,440 million in 2010
http://dspace.africaportal.org/jspui/
bitstream/123456789/34031/1/Chin
a%20Africa%20book%20(3).pdf?1
Product Label
2002
2003
2006
2008
2010
Value % of Value % of Value % of Value % of Value % of
US$
Total US$
Total US$
Total US$
Total US$
Total
All Products
73.2
123.54
4.134
668.09
1440.8
Mineral fuels, oils, distillation products, etc
71.83 98.1 109.8 88.9
0
0 147.27
22 696.62 48.3
Raw hides and skins (other than furskins) and leather
0
0 0.025
0 0.012 0.29 265.53 39.7 592.42 31.1
Plastics and articles thereof
0
0
0
0
0
0 266.79 39.9 251.97
7.5
Oil seed, oleagic fruits, grain, seed, fruit, etc
0
0 0.006
0
0
0 7.67
1.1 24.66
1.7
Ships, boats and other floating structures
0.32
0.4 6.78
5.5
0
0 6.73
1 21.73
1.5
Rubber and articles thereof
0.05
0.1 0.54
0.4
0
0 12.19
1.8 13.8
1
Footwear, gaiters and the like, parts thereof
0
0
0
0
0
0 0.36
0.1 12.51
0.9
Inorganic chemicals, precious metal compound, isotopes
0
0 0.16
0.1
0
0 0.084
0 8.96
0.6
Cocoa and cocoa preparations
0
0
0
0
0
0 1.14
0.2 6.77
0.5
Machinery, nuclear reactors, boilers, etc
0.74
1 1.81
1.5 2.68 64.83 0.78
0.1 5.57
0.4
Copper and articles thereof
0
0
0
0 0.27 6.53 13.32
2 4.64
0.3
Electrical, electronic equipment
0
0 0.11
0.1
0
0
0.2
0 4.59
0.3
Ores, slag and ash
0
0
0
0
0
0 7.17
1.1 4.37
0.3
Miscellaneous chemical products
0
0 0.25
0.2
0
0 0.15
0 2.97
0.2
Cotton
0
0
0
0
1 24.19 0.39
0.1 2.41
0.2
Wood and articles of wood, wood charcoal
0
0
0
0
0
0 6.02
0.9 1.98
0.1
Tobacco and manufactured tobacco substitutes
0
0
0
0
0
0 0.13
0 1.43
0.1
Articles of iron or steel
0.25
0.3
2.6
2.1
0
0 0.27
0 1.29
0.1
Aluminium and articles thereof
0
0
0
0
0.9 21.77 3.62
0.5 1.25
0.1
Live trees, plants, bulbs, roots, cut flowers etc 0
0
0
0
0
0
0
0
0 1.04
0.1
Source: International Trade Centre (ITC) Data Base (http://www.trademap.org Bilateral_TS.aspx)
34
Hypothesis
The strength of the unique relationship between China and Nigeria is a
consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
35
Cultural Affinity
• Are the Nigerians a little more open to Asian culture?
• Are the Chinese a little more open to Nigerian culture?
• Is cultural affinity the key point in the relationship between the two
nations?
• Does this separate China and Nigeria’s relationship from that of
others?
• Sub hypothesis
36
Cultural Affinity
• Hypothesis
• Economic relationships can strengthen as a result similar normative values
held by individuals.
Africa-Asia: Go East Young Man!
Robert Ngunyi, a 39-year-old Kenyan who runs an African restaurant, Sky Coffee, in Guangzhou, explains: "You
know, I stayed in many countries. But in China there is something that is a bit welcoming."
Japan's Nigerians pay price for prosperity
'No matter how long you live in Japan, you can never be a friend to a Japanese man," said Basil, owner of
Treasures Gentlemen's Club in Roppongi.
https://globalsociology.pbworks.com/w/page/14711167/Comp
onents%20of%20Culture
37
Cultural Affinity
• The more powerful the group – and power grows with size and
economic wealth – the less likely one is to mix with others.
• Nigeria has limited control of its population as a consequence of its
high corruption, low beaurocratic quality and democratic
accountability.
• China has limited power over its population (per capita). (Need to
prove)
• This cultural affinity merges with the other points and ensures a
strong and unique relationship develops between China and Nigeria.
38
Hypothesis
The strength of the unique relationship between China and Nigeria is a
consequence of
• Nigeria’s abundance of Resources
• Nigeria’s Low Labour Cost
• Nigeria’s massive population
• Cultural affinity between the two nations
39
What does Nigeria get from this relationship?
• A well known fact is that Nigerian military have benefited from China’s
technical assistance form of military training and even supply of military
hardware.
• Health personnel and different categories of patients patronizing public
health providers are the main beneficiaries of technical assistance offered
by China mainly in the roll-back malaria programme.
• Nigerian academia have also benefited from the cooperation arrangement
between Nigeria and China especially in the area of exchange programs
and promotion of the different culture.
• Carlos Leite suggested that increasing human capital will allow Nigeria to
move from its reliance of Natural Resources (40% GDP!)
40
40
The future…
• The Nigerians are not being taken advantage of.
• Nigerians will continue on the rocky path towards expansion of their
human capital as a result of the relationship with China.
• This relationship will provide the time China needs to increase its
productivity.
• The chances of this rosy future have increased as a result of the
similar normative values of the Chinese and the Nigerians.
41
41
Thanks!
42
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