China and Natural Resource Curse in Developing Countries: Empirical Evidence from a Cross‐country Study

• Date: 01 January 2016
• Published date: 01 January 2016
• Author: Fubing Su,Ran Tao,Guoxue Wei
• DOI: http://doi.org/10.1111/cwe.12142

18 China & World Economy / 18–40, Vol. 24, No. 1, 2016

©2016 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China and Natural Resource Curse in Developing

Countries: Empirical Evidence from a

Cross-country Study

Fubing Su, Guoxue Wei, Ran Tao*

Abstract

China’s rising demand for natural resources and its growing presence in many poor and

resource-rich countries have been criticized for promoting neo-colonialism in the 21st

century. Using panel data for 135 developing countries from 1995 to 2007, the present

paper empirically evaluates the validity of such claims. Our findings do not support the

resource curse thesis in the areas of industrialization and economic growth. Moreover, the

effect of resources is conditional on the initial quality of political institutions in a country.

Key words: China, developing countries, economic growth, resource curse

JEL codes: F13, F21, F54

I. Introduction

The rise of China has injected strong dynamism into the world economy but its global

impact has become increasingly controversial. As one of the world ’s major exporters of

manufactured products, China has been credited for easing the inflationary pressure in the

developed countries (Greenspan, 2007). However, in recent years, debate has emerged

regarding China’s role in shaping the global imbalances. At the same time, the booming

domestic economy, rapid urbanization, surging exports and the voracious appetite for cars

have significantly raised China’s demand for energy, including oil, natural gas and coal, as

well as for industrial and construction materials (Zweig and Bi, 2005). According to the US

Energy Information Administration, China was the world’s second largest oil consumer in

*Fubing Su, Department of Political Science, Vassar College, NY, USA. Email: fusu@vassar.edu; Ran Tao

(corresponding author), Professor, School of Economics, Renmin University of China. Email:

rantao1972@ruc.edu.cn; Guoxue Wei, Academy of Macro-Economic Research National Development

and Reform Commission, Beijing, China. Email: weiguoxue@amr.gov.cn. The authors acknowledge the

assistance of the China National Science Foundation the Fundamental Research Funds for the Central

Universities and the Research Funds of Renmin University of China and Vassar College.

19

China and Natural Resource Curse in Developing Countries

©2016 Institute of World Economics and Politics, Chinese Academy of Social Sciences

2008, going through 3.7 million barrels per day (EIA, 2009). China is also the world ’s single

biggest market for iron, coal, copper, cement, aluminium and nickel, as well as a major

consumer of other commodities (Mcbride, 2008). As shown in Figure 1, the overwhelming

majority of China’s natural resources are imported from developing countries.

China’s unquenchable thirst for natural resources has drawn close scrutiny from the

international community. Some analysts believe that China’s resource hunt has been a

boon to developing countries by raising the prices of raw materials in the global commodity

markets. As a result, developing countries have been flooded with cash that was badly

needed to move their economies forward. The Chinese presence has also allowed these

resource-rich countries to extract better deals from existing customers. Others argue that

China’s resource demand has had deleterious consequences on the developing world. For

instance, China’s attempt to secure resources has elevated tension in some hotspots in

Africa and the Middle East (Thomson and Horii, 2009). Unlike most of its developed-nation

trading partners, China does not attach conditions to its business deals. In addition, a non-

conditionality and non-interventionist approach has become a hallmark of China ’s trade

agreements with the third world countries. China’s increasing investments in resource

extraction and refinement have also been deemed resource-based colonialism in the new

global age (Taylor, 2008; Carmody, 2009; Cheung and Qian, 2009; Guo et al., 2014). From the

perspective of long-term economic development, resource-exporting developing countries

have become more dependent on the imports of cheap manufactured goods from China. As

Figure 1. China’s Natural Resource Imports and Developing Countries, 1992–2008

40 000

0

80 000

120 000

160 000

40

60

80

100

120

1992

1994

1996

1998

2000

2004

2002

2006

2008

Natural resource imports

(US$m)

Ratio and number

Ratio of developing countries in totoal imports

Number of developing countries which export natural resources to China

Natural resource imports by China

Sources: UNCTAD (2010) and NBSC (2010).

Year