Tapping into Excess Capacity: Chinese Machinery Exports and African Manufacturing
HKUST IEMS Thought Leadership Brief No. 82
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China’s investment in African economies has grown exponentially, largely due to its strategies for handling domestic overcapacity. Government policies led to decommissioning of old machinery, which was then exported to Africa. This provided a dual benefit - promoting economic efficiency and sustainability within China, while offering African nations machinery to boost industrialization.
While the transfer of machinery has aided African industrialization, its impact is two-fold. It enhances production and productivity in downstream industries, but if imported machinery substitutes local alternatives, it might weaken local manufacturing sectors, fostering dependence on foreign imports.The import’s impact varied across firms. Downstream exporters and large firms saw increased wages, productivity, and production. In contrast, non-exporters and medium firms experienced growth in fixed assets and electricity usage, but not employment. Effects varied based on firm size, indicating the heterogeneous nature of the import’s impact.
About the author
Jin Wang is an associate professor of Social Science at the Hong Kong University of Science and Technology. She received her PhD in Economics from the London School of Economics and Political Science. Her research, which mostly has a policy focus, is mainly in the areas of Development Economics, Public Economics and Chinese Economy. More >>
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