South Africa’s exports to China : higher quantity or bigger variety?

Abstract

In general, a country’s “fundamentals”, namely its endowments of physical and human capital, labour and natural resources along with the quality of its institutions, largely determine what it produces. Any attempt to reshape the production structure beyond the boundaries of these fundamentals is likely to fail and limit potential economic performance. Although fundamentals play an important role, it does not necessarily pin down exactly what a country will produce and export. Export expansion is pivotal in a country’s attempt to promote economic growth and can be based on either the intensive margin, involving expansion in the quantity of existing exports or the extensive margin, involving expansion in the variety of products exported. Furthermore, a country also needs to evaluate its domestic production capacity given a specific trading partner. South Africa and China are moving closer to one another as trading partners, presenting ample trade opportunities. South Africa’s sectoral exports to China identifies key trade opportunities, while export sectors with potential to export more existing products (intensive margin) or more product varieties (extensive margin) are identified in this article. This analysis could provide valuable insight into the government’s trade institutions. The information could assist in providing guidance to exporting firms to ensure increased effectiveness in a very competitive environment.