Distinguish Guests:
It is indeed a great honor for me to be invited to this dialogue and discuss with you trade-related issues and their impact on Africa's development. At the outset, I would like to say a few words about the topic of my presentation. The chairman originally asked me to speak on "The Impact of China on African Trade". I, however, strongly feel that what the topic implies is only one side of a coin. Trade, in the first place, is a two-way process. So is the impact of trade. I, therefore, would instead brief you on the overall situation of China-Africa trade and economic cooperation, and the measures China has taken or is going to take to promote such relations, so as to offer a broader perspective and food for thought in the discussion on how to better facilitate the healthy development of China-Africa cooperation and achieve common prosperity of both sides.
1. China-Africa Trade and Economic Cooperation: An Upward Trajectory
The traditional friendship between China and African countries forms a solid basis for mutually beneficial cooperation. In recent years, thanks to the efforts by both sides, trade and economic cooperation between China and African countries have achieved a great leap-forward.
In 2004, China's export to and import from Africa hit a new record high, of over US$10 billion respectively. The total trade volume reached US$29.46 billion, an increase of 58.9% over the previous year. China's export to Africa amounted to US$13.82 billion, growing 35.7%, and its import from Africa US$15.65 billion, a remarkable increase of 87.1% over 2003.
As for investment, 77 Chinese-funded enterprises in Africa were newly established in 2004, with total contracted investment of US$432 million and actual investment of US$135 million. Incomplete statistics put Chinese-funded enterprises operating in Africa by the end of 2004 at 715, ranging from trade, processing, manufacture, transportation and agriculture, to resources development, with a total contracted investment of US$1.36 billion and actual investment of US$625 million.
Apart from the fast growth of bilateral trade and investment, China and African countries also enjoy good cooperation in the international arena. Together with other developing countries, China and Africa have maintained close consultation and cooperation in safeguarding the common interests of the developing countries, and in pursuit of the establishment of a new international economic order that is both fair and rational. A successful example is the formation of G20 during the recent round of WTO talks in Cancun.
2.Outstanding Issues in China-Africa Trade and Economic Cooperation
While gratified to see the fast growth of China-African Trade, we recognize that there is imbalance stemming from structural problems in our trade relations.
Firstly, the share of the bilateral trade in the total foreign trade volume of each side remains relatively small. For instance, the trade volume between China and Africa accounts for only 2.6% of China's total foreign trade volume, promising a huge potential for further growth.
Secondly, the main products Chinese exports to Africa are machinery and electronics, textile and apparel, hi-tech product and finished goods, while imports from Africa concentrate on crude oil, iron ore, cotton, diamond and other natural resources and primary goods. For those African countries that do not have much oil or raw materials to export, trade with China is less mutually complementary, which result in the rise of their trade deficit.
Thirdly, China and African countries are both developing countries. Labor-intensive industry still plays a major role in our economies. This similarity leads to competition in certain fields between China and Africa. Textile and apparel industry is among one of them. Over the past year, Chinese textile export has become a much-debated issue in South Africa. SA textile industry complains that large influx of cheap Chinese textile, clothes and shoes have caused unemployment and closedown of local factories. It also creates intense competition for SA textile export in third market.
At this point, I would like to elaborate a little bit more on the bilateral trade issue. Imbalance of China-African trade is a fact that the Chinese side will not turn a blind eye to. But it is necessary to view the issue in a comprehensive and objective way. Take the textile trade for example: China has a very strong textile and apparel industry. With the removal of quotas on textiles and clothing exports on 1 Jan. 2005, China is bond to have greater access to the US and EU markets, as well as other markets at large. With the evolution of the international division of trade, this comes as a natural result, which is not of China's making. And this trend will stand for a long period. As for Africa, the fundamental reason for the increase of Chinese textile and clothing import is the high demand of Chinese goods, which is of high quality and reasonable price.
I remember Minister Manuel of SA used to indicate last year that, to effectively deal with the challenge from China, South Africa should take a far-sighted and comprehensive view of this issue. He called for the local industry to identify new niche markets and products, so as to improve its competitiveness and gain access to new Chinese market. I personally quite agree with Minister Manuel on his comment. From the Chinese side, we attach great importance to this issue and have done our efforts to address it.
On the other hand, due to historical reasons, western countries have a significant presence in Africa. This has created the situation that markets in most African countries are somewhat saturated with little space for new comers. To some extent, Chinese businesses are actually confronted with tougher competition from their western counterparts in Africa than in other parts of the world. This is also true when it comes to industrial investment in Africa.
3. Promising future for China-Africa Cooperation
Economic cooperation other than trade between China and African countries become increasingly relevant, as the majority of African countries have embraced market-oriented reform and readjustment. After more than two decades of reform and opening up, China now finds herself in a position to offer what African countries need, namely, sophisticated technology appropriate to African conditions at relative low cost and expertise in poverty alleviation and SMME development. In order to give greater impetus to China-Africa cooperation, the Chinese side has taken multi-pronged measures in recent years. Some of them include:
(1) Tariff-free treatment to the LDCs in Africa for their export to China.
To help the Least Developed Countries in Africa expand export, increase revenue and alleviate poverty, China has declared on the second Ministerial Conference of China-Africa Cooperation Forum (FOCAC) in 2003, to exempt import tariffs for certain commodities of these countries so as to facilitate their entry into the Chinese market. On 1 January 2005, the Chinese government announced officially the name list of 25 least developing African countries that enjoy zero tariff treatment and the special preferential tariff rate, for exports of some 190 tariff lines of products to China, ranging from food, mineral product and textile, to machinery and electronics. At present, China is pushing forward the remaining process with other countries that have not concluded the exchange of letters with China.
(2) Strengthen cooperation with African countries in the field of human resource development.
To facilitate African countries in their capacity building, the Chinese side has set up the African Human Resources Development Fund after the first Ministerial Conference of FOCAC in 2000. By the end of 2003, the Fund has sponsored a variety of training courses geared to African professionals and trained nearly 7,000 African personnel in a wide range of areas. On the second FOCAC conference in December 2003, China launched the 2004-2006 China-African Inter-government Human Resources Development Plan under the Fund, deciding to pump more resources into the Fund. The 33% increase in the fund available will allow China to hold 300 training courses in 3 years for some 10,000 African professionals in various fields. In 2004, the Ministry of Commerce alone has trained more than 2400 African personnel from 48 African countries in the fields of trade and investment, economic management and etc.
(3) Encourage capable enterprises to invest in Africa to create jobs and achieve common development. Take a positive attitude to transferring of technologies that are suitable for African countries.
(4) With regard to the textile issue, the Chinese side have taken the initiate to adopt ten measures, so as to ease the pressure on African countries. Some of the measures include:
Specific duty introduced in 2005 on certain textile and apparel products for export, which involves products of 148 tariff lines; Lowered in 2005, the average import tariff for textiles to 11.4% on the basis of its WTO commitments, instead of the scheduled criteria of 12%; Increase its assistance to textile industries of both developing countries with textile industry as the pillar of their economy and LDCs, through providing technical training for local staffs to increase their technical capacity; Put 28 categories of textile investment projects into the list of investment projects that are prohibited, to prevent over-heated investment and duplicated construction; and to further introduced standards such as ISO 9000 quality management system and ISO 14000 environmental management system, to improve the quality and environment friendliness of China made products etc.
The Chinese side believes that Chinese and African economies are highly complementary. If we ensure equality and mutual benefit and draw on each other's strength, we will achieve common development. Through the above-mentioned measures, China hopes that a friendly environment will be created to diversify China-African trade, optimize the bilateral trade structure and achieve an overall balance for China-African trade.
China-Africa trade and economic cooperation constitute an important component in South-South cooperation with great potentials. From this perspective, I believe what we discuss today will go a long way to address the issues of common concern and further tap the possibilities in the cooperation. I look forward to gaining much insight from all of you in our discussions.
I thank you for your attention.