Has China replaced colonial trade?

Abstract

China is often suspected of taking over the extraordinary trade relationships that former colonies had within colonial empires. Besides preferential bilateral relationships built after independence, the two other potential determinants of the increase in trade with China are the improvement in China’s export capacity and the natural redirection caused by independence. We investigate and quantify the three reasons that explain the level of former colonies’ trade flows with China. Using structural gravity equations, we show that methodological issues can be largely responsible for displaying and estimating abnormally high trade levels between former colonies and China. Increased trade between these pairs of countries is the result of unilateral factors rather than more intense bilateral preferences. We then measure the reorientation of trade flows from former colonies’ metropoles towards China and show that independence has produced the expected redistribution: trade flows with China would be 15% lower, had former colonies not become independent.