The 20th national congress of the Chinese Communist Party taking place in Beijing, which happens every five years, is arguably the most important political event in the world right now. The leadership team it confirms, and the policy direction Beijing announces, will have political, economic and security ramifications throughout the world for up to a decade.
The congress will focus on the stability of Chinese society, which is supported by sustainable and equitable economic growth. We can expect similar economic policies of the past decade, with added emphasis on growth being driven by state-owned-enterprises as China moves steadily away from being an export-driven manufacturing economy and to being driven more by domestic consumption.
As far as the congress’s effect on SA is concerned, my take is that SA-China commercial relations — both trade and foreign direct investments — have underperformed their potential. This is not because of any Chinese policy but that the SA government and business community have not devoted enough energy to understanding and working with China.
What we in SA need to realise is that it is up to us to navigate the relationship with the Chinese. Beijing is generally favourably disposed towards the ANC-led SA, and Chinese businesses are keen to find opportunities here. But with onerous legal requirements and a slow bureaucracy, the SA investment environment is not investor friendly. Our business people also tend to be overtly West-facing, and often ignore potential Chinese business opportunities.
The bulk of international media analysis in the West on China has the analytical framework that China’s rise as a state-capitalist economy, rather than a market-capitalist economy, is a terrible threat to market stability and global security. China may be a threat to the West as the centre of global trade, but this analysis does not necessarily apply to SA.
According to China’s customs agency, SA continued its growing trade trajectory with China in 2021. There was $54bn worth of total bilateral trade, with SA in surplus, exporting $33bn to the Middle Kingdom. The bulk of the exports from SA are commodities such as iron ore, chrome and manganese, which supply China’s domestic housing and construction sectors as well as the manufacturing sector. Should Chinese commodities demand slacken, there would be immediate detrimental effects on SA exports.
However, the rosy picture of SA enjoying a large trade surplus with China does not tell the full story. As has been noted by trade, industry & competition minister Ebrahim Patel, there are two issues. Accuracy of data and quality of trade.
First, there is a tendency by Chinese exporters to under-invoice finished goods to SA to pay less duty. The actual value of exports from China to SA is likely far larger than what is declared. Second, the bulk of SA’s exports are unfinished commodities.
While the commodities trade is an excellent export earner for SA, it is not labour-intensive. A dollar earned from exports of raw commodities has less positive effects in the SA economy than a dollar earned from exporting manufactured goods, where more workers are involved in its production.
If the issue with the SA-China relationship is the quality of trade, it is incumbent upon us to negotiate a free-trade agreement to accelerate quality trade, and to encourage more direct investment from China into SA’s manufacturing sector.
As I wrote in June, Saudi Arabia is actively lobbying to join the Brics club as it navigates the shifting global order. Given that India and SA are somewhat circumspect on Brics enlargement, Saudi Arabia is openly — seemingly successfully — lobbying SA to accede, brandishing R270bn worth of trade and investment.
Politics and economics are always inextricably linked in both domestic and international fronts. From an SA vantage point we should leverage our strong political relationship with China and use our status within Brics to advocate for better quality trade and more foreign direct investment.
• Dr Kuo, a former lecturer at the Shanghai International Studies University in China, is adjunct senior lecturer in the University of Cape Town’s Graduate School of Business.
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