Stronger Ties with China

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President Hu Jintao of China made a visit to South Africa last week, pledging to increase imports from South Africa to narrow the trade gap between the two countries and announcing a number of agricultural and economic agreements.



During his visit, South African President Thabo Mbeki and Hu signed several agreements. They included protocols on the requirements for trade in apples, pears, grapes and tobacco leaf. Also signed was a memorandum of understanding regarding the establishment of a South Africa - China mineral and energy sector co-operation committee and an agreement on economic and technical co-operation between the two countries.



Trade relations between South Africa and China have grown significantly since the two countries established diplomatic relations in 1998. South Africa, exporting predominately iron ore, diamonds, platinum and steel, is China's second-largest trading partner in Africa, just after Angola.



Bilateral trade between the two countries was worth more than $8.5bn in 2006, with the balance in China's favour.



Hu stated that his government encourages Chinese companies to increase investment throughout Africa, as well as provide technical and management training and help develop processing and manufacturing industries to help enhance the competitiveness of African exports.



China announced it would consider further contributions to the Accelerated and Shared Growth Initiative for South Africa (Asgi-SA) to which it has already committed $2.6m.



Hu's visit has not come without criticism. Rising Chinese domination on the continent has heightened concerns, including from Mbeki, who warned that Africa needs to guard against allowing its ties with China to develop into a "colonial relationship".



Government officials have indicated that South Africa's investment in China at about $400m far exceeds Chinese investment in the African nation.



Hu responded, saying "China takes seriously the concerns about the imbalance in the structure of China-Africa trade and the scope of Chinese investment... We have taken, and will continue to take, effective steps to address these concerns."



South African trade unions have expressed anxiety that cheap Chinese imports are weakening local industries. The South African textile industry reports it has lost 80,000 jobs, for which the Southern African Clothing and Textiles Workers' Union has blamed China.



In January, South Africa imposed temporary trade quotas on about 70% of clothing imports from China, to protect the local clothing industry.



The Chinese ambassador to South Africa, Liu Guijin, told OBG that China agreed last June to cut textile exports to South Africa by about a third to protect local manufacturing jobs.



Liu also told the local media that China was ready to fund programs that would help create jobs, including in training, capacity building and agricultural development.



The minister of public enterprises, Alec Erwin, has stated on several occasions that local companies should not view the emergence of China as a threat, but rather as "the biggest opportunity we've ever had".
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