bilateral trade between china and sudan

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Bilateral Trade between China and Sudan International Economics, Spring Semester 2013 Eumni Kim, Hana Jin, Peter Enos, Sophea Sok, Fatima Ibrahim, Sabin S. Chaudhary, Foster Abogye Gyamfi

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Page 1: Bilateral trade between china and sudan

Bilateral Trade between China and Sudan

International Economics, Spring Semester 2013

Eumni Kim, Hana Jin, Peter Enos, Sophea Sok, Fatima Ibrahim, Sabin S. Chaudhary, Foster Abogye Gyamfi

Page 2: Bilateral trade between china and sudan

ContentsI. Overview / Country Profile

II. Trade History

III. Trade Policies

IV. Major Commodities

V. Terms of Trade

VI. Challenges of Bilateral trade

VII. Future trade opportunities and Conclusion

Page 3: Bilateral trade between china and sudan

Ⅰ. Overview – China at a glance

FULL NAME, CAPITAL: PEOPLE'S REPUBLIC OF CHINA, BEIJING

LANGUAGE: Standard Chinese (Putonghua, official)POPULATION: 1,344.1 (millions)

KEY ECONOMIC RATIOS & LONG-TERM TRENDS

1. Rapid Economic Performance in China

Source: IMF, World Economic Outlook (Apr. 2013)

By Eunmi, Kim

Page 4: Bilateral trade between china and sudan

Ⅰ. Overview – China at a glance

2. TRADE

Breakdown in economy's total Exports Breakdown in economy's total Imports Agricultural products 3.4 Agricultural products 8.3 Fuels and mining products 3.1 Fuels and mining products 29.6 Manufactures 93.3 Manufactures

59.2

- Main destination 1. European Union (27) 18.8 1. European Union (27) 12.1 2. United States 17.1 2. Japan 11.2 3. Hong Kong, China 14.1 3. Korea, Republic of 9.3 4. Japan 7.8 4. Taipei, Chinese 7.2

Source: Development Economics LDB database, World Bank

By Eunmi, Kim

Page 5: Bilateral trade between china and sudan

Ⅰ. Overview – Sudan at a glance

Country Profile

FULL NAME, CAPITAL: REPUBLIC OF THE SUDAN, KHARTOUM

LANGUAGE: Arabic, English (official)POPULATION: 34.3 (millions)

KEY ECONOMIC RATIOS & LONG-TERM TRENDS

1. Economic Performance in Sudan

Source: IMF, World Economic Outlook (Apr. 2013)

By Eunmi, Kim

Page 6: Bilateral trade between china and sudan

Ⅰ. Overview – Sudan at a glance

Country Profile

TRADE Breakdown in economy's total Exports Breakdown in economy's total Imports Agricultural products 6.2 Agricultural products 23.8 Fuels and mining products 87.6 Fuels and mining products 3.1 Manufactures 0.7 Manufactures 72.2

- Main destination 1. China 65.3 1. China 16.6 2. United Arab Emirates 10.5 2. European Union (27) 14.4 3. Canada 8.8 3. Japan 9.5

Source: Development Economics LDB database, World Bank

Page 7: Bilateral trade between china and sudan

Ⅱ. Trade history between Sudan & China

◈ to establish official relationships

◈ ETC(Economic and Technical Cooperation)

◈ CSTP(Cultural, Scientific and Technical Protocol)

◈ the Tiananmen Square crackdown & the Bashir -Turabi coup

=> alienated China&Sudan from western countries and led them to a strong partnership.

19591959

19891989

19621962

19701970

By Hana Jin

Page 8: Bilateral trade between china and sudan

Ⅱ. Trade history between Sudan & China

◈ C began to pursuit external E

sources - By 1996, CNPC took control of

most of Sudan’s oil

◈ Purchased 70% of Sudanese oil exports

◈ Trade Volume: 8.6 billion USD

◈ South Sudan’s independence => Sudan lost ¾ oil production, trying to boost exports in

agriculture

◈ China & Sudan signed up to set up

an agricultural trade zone

2011 2011

20122012

20102010

Mid-1990sMid-

1990s

Oil

Low InterestLoans,

Weapons

By Hana Jin

Page 9: Bilateral trade between china and sudan

Trade Policies

• China’s unilateral tariff preferences. Duty-free access to 95 percent of imports from LDCs including Sudan.

Table 1.0 Sudan Faces Mostly Low Tariffs in Major Export Markets Importing Country Simple Weighted Maximum Coefficient Share Tariff Average Average Rate of variation Non-deductibals Year China 7.7 0.32 40 77 97

2006 European Union 0 0 0 95

2006 India 13.6 15.4 30 48 5

2005 Indonesia 3.3 0.1 20 169 98 2001 Japan 2.6 0 29.8 436 100

2006 Korea 35.1 20.1 630 152 1 2006 Saudi Arabia 0 0 0 100

2006 MENA average 1.2 0.69 30 338 88 2006

SSA average 4.8 2.3 30 154 41

2006 Source: WITS calculations using UNCTAD TRAINS and UN Comtrade databases. Notes: Averages are derived using traded products only. Calculations assume that all available preferences are

utilized and do not take into account tariff exemptions, duty-drawbacks, etc

By Peter Enos

Page 10: Bilateral trade between china and sudan

• Open-door Trade and Investment Policy (Deng Xiaoping’s rule) vs selective protection in foreign investment and industrial policy targeting- Extensive government subsidies

• Non-interference on domestic affairs of the partner state. Trade sometimes driven more by foreign policy than commercial considerations

• Engagement approach vs punitive approach• Trade, FDI and aid- China agreed to write off $80

million in Sudanese debt, and provide an interest-free unconditional loan of $13 million for infrastructure projects, including a new presidential palace; pledged $5.1 million for humanitarian aid for Darfur

Trade Policies

By Peter Enos

Page 11: Bilateral trade between china and sudan

Sudan

• Mutual quality assurance policy; both imported and exported commodities: Quality and Health standards

• Competition policy- Microcredit and business skills to small and medium enterprises aimed to enhance competition with Chinese business.

Trade Policies

By Peter Enos

Page 12: Bilateral trade between china and sudan

Trade Policy: Implications

China

• Access to natural resources exploitation due to (so-called) mutual trust.

• Estimates state that nearly 400 million people have been lifted out of poverty due to trade over the last 25 years.

Sudan

• Exporters benefit from tariff preferences

• An increase in volume of trade in non-oil exports

• Consumer surplus • Political stability,

governance and human rights in a deadlock?

By Peter Enos

Page 13: Bilateral trade between china and sudan

By Sophea Sok

Trading Commodities

Page 14: Bilateral trade between china and sudan

Exports $11.67 billion (2008 est.)

Imports $8.229 billion (2008 est.)

Exports – commodities

oil and petroleum products; cotton, sesame, livestock, groundnuts, gum Arabic, sugar

Exports – partners China 49.8%, Japan 33.4%, Indonesia 5.5% (2008)

Imports – commodities

foodstuffs, manufactured goods, refinery and transport equipment, medicines and chemicals, textiles, wheat

Imports - partners China 20%, Saudi Arabia 8.4%, UAE 6.2%, India 6.1%, Egypt 5.5%, Italy 4.1% (2008)

By Sophea Sok

Trading Commodities

Page 15: Bilateral trade between china and sudan

•Sudan Trade with China

By Sophea Sok

Trading Commodities

Page 16: Bilateral trade between china and sudan

• Sudan’s export volume to China

By Sophea Sok

Trading Commodities

Page 17: Bilateral trade between china and sudan

• Arms Trade

• China is also Sudan’s main supplier of arms and has big interests in railways and other Sudanese ventures.

By Sophea Sok

Trading Commodities

Page 18: Bilateral trade between china and sudan

•Arms Trade

By Sophea Sok

Trading Commodities

Page 19: Bilateral trade between china and sudan

•Arms Trade

• The first reported shipment of Chinese arms to Sudan appeared under the rule of Sadiq al-Mahd (1986–89).

• Arms deliveries from China to Sudan

• China

• Military weapons and small arms from China to Sudan were valued at USD 1 million in 2002 rising to USD 23 million in 2005.

• USD 57 million worth of aircraft equipment was transferred to Sudan between 2003 and 2005.

• Ammunition, high altitude bombs,

• Tanks and military trucks, • Helicopters, and fighter

aircraft. • Appears to have become Sudan’s largest seller of weapons just prior to the onset of the Darfur conflict.

• Arms sales to Sudan since 2004 account for 90% of small arms present in the country, and

• Provision of training, transport vehicles and aircraft have also added to the Sudanese arsenal.

By Sophea Sok

Trading Commodities

Page 20: Bilateral trade between china and sudan

Terms of Trade

FATIMA IBRAHIM

Page 21: Bilateral trade between china and sudan

About Terms .Of .Trade

• Is the value of a country’s exports relative

to that of it’s imports. It is calculated by

dividing the value of exports by the value

of imports, then multiplying the result by

100%.

Measurement is recorded in an index, for economic monitoring.

By Fatima Ibrahim

Page 22: Bilateral trade between china and sudan

Less than 100%

If a country’s terms of trade is less than 100%, it means that there is more capital going out to buy imports than there is coming into the country.

It is often important to know why exports increase relative to imports, especially since the terms of trade are directly impacted by changes in export and import prices.

By Fatima Ibrahim

Page 23: Bilateral trade between china and sudan

Greater than 100%

A result greater than 100% means the country is accumulating capital i.e. more money is coming in from exports.

Using terms of trade to determine the health of a country’s economy can draw the wrong conclusions.

By Fatima Ibrahim

Page 24: Bilateral trade between china and sudan

Effects of T.o.T

By Fatima Ibrahim

Page 25: Bilateral trade between china and sudan

If we must trade…

• Trade will only take place if the terms of trade lie within the opportunity cost ratios of production for both countries.

By Fatima Ibrahim

Page 26: Bilateral trade between china and sudan

Price may fluctuate

By Fatima Ibrahim

Page 27: Bilateral trade between china and sudan

Improving & Deteriorating T.O.T

By Fatima Ibrahim

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Terms of trade index

By Fatima Ibrahim

Page 29: Bilateral trade between china and sudan

Assumptions

It is assumed that due to the ff reasons the terms of trade(earnings)index will remain inconsistent in terms of improvement & deterioration between the two countries due to : -

•Constant price fluctuation in the global oil market

•Foreign exchange rate increase or decrease.•Depreciation or appreciation in their stocks

most especially for Sudan’s case coming from a fragile status of War and Separation.

By Fatima Ibrahim

Page 30: Bilateral trade between china and sudan

Challenge of Trade

• After Secession of South Sudan, Sudan doesn't have much oil to trade

By Sabin S. Chaudhary

Page 31: Bilateral trade between china and sudan

• Conflict:▫Between South

Sudan and Sudan

▫In Darfur Area▫Rebel groups

Challenge of Trade

By Sabin S. Chaudhary

Page 32: Bilateral trade between china and sudan

• Sudan has been trying to boost exports of agricultural products and livestock.

Sudan: Share of agriculture in GDP Source: CIA factbook

Challenge of Trade

By Sabin S. Chaudhary

Page 33: Bilateral trade between china and sudan

• When investment activities carry with them labor-intensive components (building and construction). Chinese labor is largely involved.

Challenge of Trade

By Sabin S. Chaudhary

Page 34: Bilateral trade between china and sudan

Opportunities

• China should serve as a Peace Broker for the conflict between the two Sudan countries to prevent full-fledged war▫Reducing its arms shipments to the region▫Human Rights

• Market Expansion: Free Trade Zone for Agriculture products and livestock to boost bilateral transactions

• Diversification into Mining such as gold

By Foster Abogye Gyamfi

Page 35: Bilateral trade between china and sudan

Opportunities

• Petrochemical Industry

• Financial Institutions

• Economic Infrastructure▫ Transportation System: Railway ($ 1.15bn)

▫ Airport Expansion

▫ Telecommunication

▫ Sea Port Expansion

• Capacity Building

▫Research Center

▫Education Institution

By Foster Abogye Gyamfi

Page 36: Bilateral trade between china and sudan

Economic Gains

• Oil Fees:▫2013 $500mn▫2014 $2bn

• Transit for Goods

By Foster Abogye Gyamfi

Page 37: Bilateral trade between china and sudan

Conclusion

• China helped addressed the issue of the oil fee impasse between North and South Sudan primarily through diplomacy

• China was the first country to supply troops to the UN Mission in Darfur (UNAMID)

• South Sudan is to receive US$8 billion loan ▫Earmarked for road, hydropower, infrastructure

and agriculture projects

By Foster Abogye Gyamfi

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Conclusion

• Sudan had served as bridgehead for China into Africa oil market

• Sudan has been a major recipient of Chinese foreign aid, due to the good political relations between the two governments

• What is your thought of China’s Trade as against Human Rights violations?

Page 39: Bilateral trade between china and sudan

Reference

• Energy Information Administration (EIA), “Sudan and South Sudan,” Country Analysis Briefs (updated March 19, 2012), http://www.eia.gov/cabs/Sudan/

• www.thediplomat.com/china.../no-strings-attached-evaluating-chinas-trade- relations-abroad

• International Crisis Group (ICG), “China’s New Courtship in South Sudan,” Africa Report No. 186 (2012): 2

• https://www.cia.gov/library/publications/the-world-factbook/geos/od.html

• Riek Machar, “South Sudan: A History of Political Domination – A Case of Self-Determination,” University of Pennsylvania – African Studies Center, (1995),http://www.africa.upenn.edu/Hornet/sd_machar.html; Peter Woodward, “Towards Two Sudans,” Survival: Global Politics and Strategy 52, No. 3(2011): 5.

• Associated Press, “Sudan says it ran South Sudan troops out of border oil town; South Sudan announces withdrawal,” Washington Post, April 20, 2012

By Foster Abogye Gyamfi

Page 40: Bilateral trade between china and sudan

Thank you.