Developing south-south cooperation: The case of Ethio-China economic relationship

Rabia Yimam Damtew, Samson Maekele Tsegay

Abstract


Through secondary data and open-ended questionnaire, the study examines the Ethio-China economic cooperation by focusing on trade and investment from the Ethiopian side. Drawing on the concept of South-South Cooperation, the paper argues that despite the socio-economic and technological variation between Ethiopia and China, both countries benefit from their economic cooperation. To understand the issue, the study focused on two main issues: the current situation of Ethio-China economic cooperation, and possible challenges the cooperation could face. The various agreements on technological cooperation between the two governments show that the Ethio-China cooperation is strongly substantiated by the two governments’ political relationship. The study also indicated that despite in Ethiopia trade balance favors China and most of the investment projects are solely owned by Chinese investors, Ethiopia is still benefiting from FDI, transfer of knowledge, as well as different Chinese loan and aids. The result from gravity model shows that Chinese population and distance between the two countries affect trade between Ethiopia and china negatively, whereas both indicators have no significant effect on trade facilitation. Without generalization, the research to some extent can be considered as explanatory to other South-South Cooperation particularly in connection with China and other developing countries that share similar conditions as Ethiopia.

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