One under-explored aspect of the prospect of a slow-down in Chinese growth — a so-called “hard landing”, which some have inferred from the declining returns on infrastructure spending in the country — is that it will hit hard for the poorer countries which have chosen to rely on China.
China has been outsourcing its own outsourced work for some time. The BBC reports from “China Town” outside Addis Ababa, which is very different from the Chinatowns of the west:
Two production lines make 2,000 pairs of shoes every day for global brands, including Guess and Tommy Hilfiger.
There are perks – the factory has its own canteen and tennis courts, the workers receive training and are supplied with their own uniforms. However, sometimes workers receive a wage which can be lower than what a worker in an indigenous factory might receive.
China has also been gearing up to take part in resource extraction on the continent, investing heavily in oil wells in Sudan and South Sudan.
That leaves many countries suddenly exposed to a slowdown. New analysis from the Overseas Development Institute suggests that three in particular (Ethiopia, Senegal and Tanzania) would suffer from being exposed not only to a Chinese or Indian slowdown, but also from slowdown in the EU and energy price shocks.
ODI research fellow Isabella Massa said:
Generally speaking most countries we looked at are doing fairly well in quite a volatile environment but the most vulnerable African countries are especially exposed to the growth slowdown in China and India.
The evidence points to significant downside risks for the global economy in 2013, which is why it is vital that countries take a close look at how they can raise their own productivity and target sustained growth at the kind of rates we continue to see across much of Africa.
If China does pass on its growth shocks to those nations, will it follow Europe down the road from imperialism to charity? How much responsibility does the Chinese government feel to the countries it is now operating in?
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