Chinese Economy Signals Good For South Africa

The curtain has fallen for China’s annual “two sessions”, namely the annual plenary sessions of the National People’s Congress and the Chinese People’s Political Consultative Conference. Over the past weeks, I have been in China for annual consultation as the Chinese ambassador to South Africa.

This trip home has proved to be extremely meaningful as it offered great opportunities to follow the “two sessions” up close and to exchange views with a range of government departments on ways to implement the results of President Xi Jinping’s state visit to South Africa and the Forum on China-Africa Cooperation (Focac) in Johannesburg last December. It is my strong impression that this year’s “two sessions” have sent to the world positive signals on the Chinese economy, which is good news for China-South Africa and China-Africa relations.

A new development concept will lead the new normal of China’s economy.

During this year’s “two sessions”, China’s National People’s Congress adopted the 13th Five-Year Plan for the years 2016 to 2020. This plan is of particular significance, because the 13th “Five-Year Period” is a decisive phase for China to accomplish building a moderately prosperous society in all respects; an important milestone for the great renewal of the Chinese nation. China will double the 2010 gross domestic product (GDP) and per capita personal income by 2020. To achieve the goal of moderately prosperous society, five new development concepts have been proposed in the 13th Five-Year Plan, including innovation, co-ordination, green development, opening up and sharing.

In the next five years, China aims to strengthen innovation as the primary driving force for development, making sure that the contribution of scientific and technological advances towards economic growth reaches 60 percent by 2020.

The government will attach greater importance to co-ordinated development among regions and between rural and urban areas, with the goal of a 60 percent urbanisation rate by 2020. China will step up efforts to improve its environment and cut its energy intensity and carbon emission per unit of GDP by 15 percent and 18 percent respectively from the current level.

On the aspect of opening up the economy, efforts will be made to promote the “Belt and Road Initiative”, facilitate international collaboration on production capacity and establish high-standard free trade regimes. The Chinese government will also focus on improving people’s livelihood to ensure that growth will be shared by all. China has set ambitious goals of creating 50 million plus urban jobs and lifting all 57.75 million of the poor population per current standard out of poverty.

Structural reform

To achieve the goal of a moderately prosperous society, intensified efforts for structural reform are required to adapt to the economic new normal. The path forward will be difficult but, at the same time, rewardingly sustainable. In the next five years, while continuing to moderately expand domestic demand, China will take parallel steps to promote supply-side structural reform, which will combine efforts to cut overcapacity and excess inventory, deleverage, reduce costs and strengthen points of weakness.

By resolving these structural problems, we will further release the dynamic strength of the economy and maintain mid- to high-speed economic growth.

Capacity cutting will first and foremost focus on the steel and iron industry and the coal industry. In the next five years, 100 to 150 million tons of steel and iron production capacity will be cut. The measure will not only optimise our domestic industrial structure, but also more broadly, ensure the balance of supply and demand in the international commodity market. In addition, steps will be taken to reduce excess real estate inventory, relieve corporate debt burden, and cut operational cost of businesses. There will also be increasing policy and financial support to improve infrastructure, technological innovation, agricultural production and public service.

China’s economic development will bring more impetus to China-South Africa and China-Africa co-operation. During the Focac Johannesburg summit, President Xi announced that China would implement ten co-operation plans with Africa, and would provide $60 billion (R917bn) financial support in this regard.

“The world economy is sluggish and China’s growth is slowing down. Will this affect China-Africa economic co-operation and China’s development aid to Africa?” one African journalist asked Chinese Foreign Minister Wang Yi during China’s annual “two sessions”. Foreign Minister Wang said: “When China makes a promise, it always delivers.” This clear answer comes from the confidence in China’s economic prospect, as well as the bright future of China-Africa co-operation.

China’s economy is indeed facing increasing downward pressure, but hope and challenges co-exist. If we look at the “fundamentals” and “big trend”, hope outweighs challenges. In 2015, China contributed more than 25 percent to world economic growth.

China’s GDP increased by 6.9 percent, which was faster than most other major economies. The service sector as a proportion of GDP rose to 50.5 percent. The contribution of consumption toward economic growth reached 66.4 percent. High-tech industries and equipment manufacturing grew faster than other industries.

The penetration of the internet into all industries picked up pace. Business start-ups and innovations by the general public flourished, with an average of 12 000 new businesses registered per day across China.

The data showcases that as the second largest economy, the largest country in terms of trade in goods and a major overseas investor, China remains as an important engine driving the economic growth of developing countries.

It is unreasonable to blame the fall in world commodity prices and the slowdown of Africa’s economy on China. In fact, China has adopted a proactive import policy, which is crucial for stabilising the international commodity market.

In 2015, China’s import volumes of major energy, mineral and agricultural products kept increasing. More importantly, as Foreign Minister Wang Yi said, the most salient feature of the ten co-operation plans announced by President Xi at the Focac Johannesburg summit was that we wanted to transit from a trade pattern that had so far been dominated by resource products to more investment and industrial co-operation.

By encouraging more Chinese businesses to invest in Africa, we wish to help the African continent accelerate its industrialisation and boost its capacity for development. These plans could not have come at a better time. They are designed precisely to help Africa deal with the new challenges from the global economy.

Strength and efficiency

In January, China launched the $10bn China-Africa Fund for Industrial Co-operation, further displaying China’s willingness, strength and efficiency in promoting China-Africa co-operation. Just three months after the Johannesburg summit of Focac, China has gotten in touch with most African countries to follow up on the outcomes of the summit. A number of early harvest items will materialise soon.

South Africa is the co-chair of Focac and an influential major country in Africa. China and South Africa could and should play an exemplary role by taking the lead to implement the outcomes of the summit so as to set a fine example.

During President Xi Jinping’s state visit to South Africa in December, the two presidents witnessed the signing of 23 co-operation agreements. The two countries will further strengthen co-operation in such areas as blue economy, production capacity, special economic zones, energy, infrastructure building, human resource development and finance.

People with vision from both China and South Africa agree that 2016 is the year of implementation in the history of China-South Africa ties. My colleagues at the embassy have been engaged in active contact with the South African side to push forward our bilateral co-operation.

Relative departments of both countries have initially decided to hold the meetings of China-South Africa Bi-National Commission and China-South Africa Joint Working Group within this year, with the aim of further promoting bilateral co-operation in key areas and on major projects.

A journey of one thousand miles begins with the first step. China is forging ahead to complete the building of a moderately prosperous society in all respects. African countries are also accelerating the implementation of Agenda 2063 and its First Ten-Year Implementation Plan.

China stands ready to work with South Africa and other African countries to create an even brighter future for us all.

source: IOL


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