The Impact of China-Burkina Faso Trade on Burkina Faso Economic Growth

Abstract

The impact of trade expansion of China on Burkina Faso's economy is analyzed in this work through these two channels: trade in goods and services, foreign direct investment. To capture the direct and indirect effects of Chinese trade, a computable general equilibrium model is used. The different simulations that have been used are gathered in groups. The first group includes an increase of the transfers from China to Burkina Faso by 10%, an increase of 5% of the stock of productive capital, an increase of 2% in the total factor productivity. The second group includes an expansion of the exports from Burkina Faso to China by 5%w; a decrease of international export prices of manufactured products plus an increase in international prices of export commodities; and a decrease of the international import prices of products from China. The simulation results show that the simulations of trade expansion have led to an increase of domestic prices, exports and imports from China. In addition, the effect on economic growth, value added and household’s welfare is low. Regarding the first group of simulations, the results show a decline of domestic prices, and an increase of exports and a decrease of imports. More FDI inflows induce a raise of economic growth equal to 1.90%, of total labor demand 0.08% and an increase of the average well-being of household by 1.41%. The majority of the population in Burkina Faso is cotton farmers and they are those who welfare raise the more 1.81.

China’s trade expansion is now playing a very important role in the global economy. More especially to the increasing investment in developing countries, China has also gained an important place among the main countries providing development assistance. For the past 15 years, and especially since the establishment of the “Forum on China-Africa Cooperation” (FOCAC), China has been one of the main economic partners of Sub-Saharan Africa both in terms of trade, investment and development aid. Some researchers from Burkina Faso are also investigating to measure the impact of this expansion of Chinese presence and trade on economic growth and employment in Burkina Faso.

Keywords: trade expansion, economic growth, impact, computable general equilibrium, simulation, China, Burkina Faso

DOI: 10.7176/JESD/11-22-05

Publication date: November 30^th 2020