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Abstract: A significant body of literature has held that Chinese interest in Africa is driven by a hunger for resources. This makes Ethiopia an important case study. Ethiopia experienced high rates of economic growth from 2003 onwards, thanks to rapid agricultural development. This period was also characterized by an intensification of Ethiopia-China relations. Bilateral trade between the two countries expanded rapidly, and China is currently the country's top trading partner. Ethiopia gained from China's zero-tariff-policy on agricultural imports, and there was a dramatic growth in its sesame exports to China. China is also a major source of manufactured goods and machinery for Ethiopia. Despite being an agricultural exporter, it has attracted significant volumes of Chinese official financial flows and foreign direct investment (FDI). Chinese official finance is directed to building infrastructure, whereas Chinese FDI is directed to the manufacturing sector. This article concludes that the overall impact of China on Ethiopia is beneficial.
Key words: China-Ethiopia relations; Ethiopia-China trade and investment linkages; impact of China on Ethiopia
Introduction
Ethiopia is an important case study because it is a significant departure from the body of literature on China-Africa relations which has held that Chinese interest in Africa is primarily driven by hunger for resources. Agriculture is the dominant economic activity in Ethiopia. Nearly 85% of the population is dependent on agriculture, and agriculture accounts for about 41% of Ethiopia's gross domestic product (GDP) and 90% of its export earnings. The Ethiopian government has recognized that rapid agricultural growth is a necessity for poverty eradication and high rates of economic growth. Therefore, agriculture is the cornerstone of the "Growth and Transformation Plan," and the country has embraced the strategy of Agricultural Development Led Industrialization.
Ethiopia experienced high rates of economic growth from 2003 onwards and has outperformed most other African countries. Its GDP grew at a rate of 10.9% from 2003 to 2013 as compared with 4% from 1993 to 2003.1 Ethiopia's growth is largely led by rapid growth in agriculture, and there has been a remarkable growth in agricultural production from 2000 onwards. The compound annual growth rate of production of major food crops, viz. maize, sorghum, wheat and barley from 2000 to 2013 was 7.2%, 9.7%, 8.9% and 6.9%, respectively.2 Output growth in the...