Report
of the Portfolio Committee on Trade and Industry on a Study Tour to the Peoples
Republic of China, 02-10 September 2006:
TERMS OF REFERENCE
The Committee had agreed to undertake a study tour of the Peoples Republic of China pursuant to an invitation from
the Ambassador of the Chinese Embassy on behalf of the Ministry of Commerce of
the Peoples Republic.
LOGISTICAL ARRANGEMENTS
A delegation from the Portfolio Committee on Trade and Industry undertook a
study tour of the Peoples Republic of China, from 02 – 10 September 2006. The Chairperson
of the Portfolio Committee, Mr. B D Martins (ANC) accompanied by Mr. S Maja
(ANC), Mrs. D Ramodibe (ANC), Mr. L Labuschagne (DA), Mrs. E Chang (IFP) and
Ms. M Williams (Committee Secretary), led the multi-party delegation.
BACKGROUND
As a developing country, China with
an economy driven by a strong export performance and public investment, shares
similar positions with South Africa with regard to the reform and governance of
the global economic system. Reform of the economic system is a key element in
South Africa’s multilateral agenda and China has the potential to be an
effective ally in this regard. The growth of China and its manufacturing
prowess has had a significant impact on global trade, and it offers vast
opportunities and potential to absorb a higher
proportion of value-added exports. In light of the commonalities that emerge
from comparable levels of industrial development and economic growth, China
holds significant and unique opportunities for South Africa’s own development
more specifically in the areas of investments; joint ventures and technology
transfer, as well as the regeneration of the African Continent, in which China
has shown great interest. The China-Africa Forum on the renewal of Africa and
co-operation in the globalising world enhanced the strategic understanding
between the two countries, particularly within NEPAD and in the SADC region.
Conversely, the rise in Chinese imports particularly in the clothing,
textile and footwear sector has impacted immensely on the South African economy
and subsequently prompted the Committee to embark on this visit.
OBJECTIVES
The objectives of the visit to China were informed by a need to find answers to
the following questions or challenges:
What government support programmes are currently offered to the Chinese
industry, from an industry, perspective,?
What are the key drivers for the success of the Chinese manufacturing sector?
How the proposed SACU – China Free Trade Agreement can deliver mutually
beneficial benefits in the light of the challenges in the clothing and textile
sector?
Also, the need to devise urgent concrete bilateral solutions to the challenges
facing the South African clothing, textile and footwear sector and
beneficiation of South African companies more specifically in the area of raw
materials; mining and extraction segments.
FINDINGS
The Portfolio Committee on Trade and Industry delegation met with the
official from the South African Mission in Beijing, Mr. Liks Ramushu on Sunday
03 September along with Mr. Chai Zhijing from the Ministry of Commerce of the
Peoples Republic of China.
Presenter: Mr. Zhao Xin Xin, Deputy Director
Beijing Development Area (BDA), Beijing
The presentation was preceded by
a showing of a DVD footage relating to the Beijing Technological
Development Area. Major Companies such as Nokia, Panasonic and Sony occupy
offices here. A second phase of development is planned especially for the
Beijing Olympics.
Mr. Xin Xin informed the meeting that the Beijing development area/ zone (BDA) was an area of approximately 40 square
meters. 15 square meters was
comprised of 2000 companies. Two development areas were currently under construction. The BDA was approved in 1994 by
the Government of China and by 2020 it will have developed into a newly
developed city. By June 2006, 1986 companies had been registered with the BDA
of which 400 were foreign companies and 1400 domestic. This amounted to an
investment of US$13.6 billion in terms of foreign investment and US$11.5billion
as domestic investment, US$4billion was reinvested back into the development
zone. Resident foreign investors are the United States and Europe but the
Chinese would like Africa to invest as well. The BDA houses 80 international
companies of which 53 are from the top 500 companies in the world. The top
three comprises the electronic, automotive and biochemical trades.
The Chinese government departments in co-operation with the Beijing
Municipality established offices at these development zones to offer hands-on support in areas of
administration. Registration of companies is done at the government offices
located in the zone, which assists in processing of applications. The Beijing
office will use the BDA’s to enhance the investment relationship with South
Africa in terms of trade and co-operation.
Municipalities are set up within the zones so that companies do not have to
travel outside the zones for registrations. Hands-on support is available therefore location is important in
setting up a BDA. Customs, taxation and quarantine offices are all available on
site at branch offices. Approximately 150 applications are processed yearly.
Applications take between 1 week to 1 month.
When BDA’s were set up, the people factor had to be considered. Those who
previously owned the land were compensated by means of monetary value,
employment and setting up new communities. This is a contributing factor to the
cost of a BDA being so high.
China is participating in a worldwide competition to attract industries to its
BDA’s. The state determines preferential policies and active marketing
strategies are investigated currently. However many cities in China are using
China’s features of good service and supportive BDA’s as a marketing tool.
In terms of women being empowered, there is no discrimination at the BDA’s.
Women prefer the fields of human resources; marketing and sales. A women’s
rights protection agency is based at the BDA and thus far no complaints have
been received. Females steer away from construction sites because the buildings
are high rises, it is hot, dangerous and labour intensive, however some manage.
The BDA’s assist in solving the unemployment issue in Beijing as approximately
39 000 workers are employed and intensive training is undertaken yearly of
approximately 3 700 workers. A training fund has been established by the
government for this purpose. Disabled persons are catered for in suitable work
positions in factories. From this briefing it was clear that China and South
Africa are both developing countries, however China has a higher level of
development than South Africa. South Africa can definitely learn lessons in
best practice and implementation from it’s Chinese counterpart.
Presenter: Mr. Guangsheng Shi,
Chairperson: Economic and Financial Committee, National Peoples Congress,
Beijing
Mr. Shi welcomed the visit by the delegation in light of the good relations
held with former President Mr. Nelson Mandela and President Thabo
Mbeki. He further added that inter Parliamentary exchanges /were welcomed and should be a regular
activity. Mr. Shi informed the meeting that China came from a history of Feudalism and Imperialism which brought
along with it oppression. China had
thus been left to improve the lives of its people as well as the economy. This is the
common objective of both governments, the betterment of the lives of the
nation. Mr. Shi said. He went further to say that both
governments had done a good job
in building up their countries. The Chinese were appreciative of South Africa’s support and assistance to China’s
accession to the World Trade Organisation, especially in terms of the Doha
Round of negotiations which is important for all developing countries.
Subsidies and domestic support were
still high from the US and Europe, he
indicated. This, he said,
affected China tremendously
especially as agriculture was a
life line of the economy and China had
a population of 1.3 billion people. China and South Africa serve as a role
model to other developing nations in their development and roles of leadership,
he remarked.
Mr Shi pointed out that conflict of interest arise when
nations have similar industries and economic needs and for this reason it is
important to keep the lines of communication open. A case in point, he said, was the Clothing and Textile industry. It served livelihood for both nations, and thus a solution should be
found. Political issues should not impact on trade issues, he argued.
The National Peoples Congress is the highest authority of power in China, which
constitutes a single congress. Delegates are elected and rotated every five
years. 175 comprise standing committee members and they commence a plenary
every two months. The National Peoples Congress considers nationwide
legislation and endorses national leaders.
Mr. Shi continued by explaining that during his career, he had witnessed the
development of China’s textile industry. This process came about in the 1970’s
due to the poverty experienced by the Chinese; the livelihood of many Chinese
people was challenged. For this particular reason, labour intensive interests
were mobilised. The textile industry started with spinning and yarning, at this
point there was no export market for textiles due to the underdevelopment of
technology in so far as delivering an unfinished product was concerned. 15
years later China started experimenting with clothing manufacturing. The focus
was targeting the lower end market for export, because at this time Chinese
clothing were not available in upmarket stores in the US and Europe, also the
spinning was done with home based machines. At this point the Chinese
government decided to intervene and assist. After a period of 10 years, the
industry moved to making suites instead of single processing. Thus the success
of the Chinese industry happened over a period of 3 decades, from the
development to importing raw materials, processing and then supplying. The
process of developing raw materials has also moved to where 80% of the raw
materials are supplied by the domestic market. This enabled the entry of high end and middle range products into the
various markets.
Mr. Shi added that with the experience that China had been through it would
be able to assist and encourage South Africa to manufacture and process raw
materials, and future co-operation instead of competition was envisaged. South Africa has land
masses available and these should be explored. In terms of Intellectual
Property, China is very vigilant regarding issues relating to it and
legislation around intellectual property is scrutinised carefully. China has
made great strides in terms of realizing that Intellectual Property and
economic growth and development go together. From this briefing the delegation
learnt that the Chinese textile industry is not an overnight success story. It
progressed over a period of approximately thirty years to develop and become
market related for exports.
Presenter: Mr. Yao Weigun, Director:
Shanghai World Trade Organization Consultation Centre, Shanghai
Mr. Weigun informed the delegation that the Shanghai WTO Consultation
Centre was the largest service
centre of its kind in the world. The centre was founded prior to China’s
accession to the WTO. It was established as a non governmental organization for
WTO affairs by the Shanghai Municipal Peoples Government. The main function
being to provide governments, enterprises and public with law and policy
consulting and information as well as WTO related training services. It also
updates WTO members on the creation and enforcement of trade related laws,
regulations and policies in both Shanghai and China as a whole.
A board of trustees administers
the centre. It is a non-profit public service organization and mainly
financed by the Shanghai Municipal Peoples government, however it is allowed to
receive donations from international, domestic enterprises and institutions.
Presenter: Mr. Zhou Yupeng, Vice Mayor:
Shanghai’s Municipality,
Shanghai
The Vice Mayor hosted a banquet for the Committee and a short exchange was
held. Mr. Yupeng was happy to host the delegation for that short period an
added that economic exchanges should be pursued between South Africa and China.
Presenter: Mr. Liu Xiaodong, Deputy
General Manager: Shanghai Stock Exchange, Shanghai
Mr. Xiaodong informed the delegation that the Shanghai Stock exchange enjoyed a strong relationship with the
Johannesburg stock exchange. China has experienced rapid economic growth over
the last few years, 10.2% growth in the GDP in 2005, especially in Shanghai.
Two thirds of the shares on the Shanghai Stock Exchange are owned by the
government but this will in fact change. Air Asia as well as Air China are both
listed on the market. The technology that the stock exchange has invested in is
one of the leaders in the information technology industry and in the world.
This particular technology processes 20 000 transactions are per second. The
Shanghai stock Exchange would in fact like to enter into a Memorandum of
Understanding with the JSE and this could bring about co-operation in the
running of the JSE in terms of advanced technologies.
Since China’s accession to the WTO, foreigners are able to buy shares on the
Shanghai Stock exchange. Two schemes are available for this purpose. Road shows
would be coordinated if South African investors are interested in investing in
the Shanghai Stock exchange. Also, visit tourism should be explored as well as
training of entrepreneurial South African youth by their Chinese counterparts.
The Shanghai Stock exchange admires the JSE code of conduct and believes
strongly in the aims of corporate governance. It released its audit to the
annual report of the listed companies up holding good practices.
Mr. Xiaodong concluded that these opportunities should be explored because
China is definitely a friend of South Africa’s and has great respect for ex
President Nelson Mandela. The Beijing games in 2008 and Fifa World Cup in 2010
should be used as avenues of co-operation and communication.
Presenter: Mr. Zhoa Zhali, Director:
Baosteel, Shanghai
Mr. Zhali informed the delegation that Baosteel steel conglomerate was a
result of the Chinese reform process started in the late 1970’s. The plant
comprises an area of 19km squared. The first phase of investment into baosteel
amounted to RMB 12.5 billion. Of the four phases 3 have been completed.
Baosteel became a public company in 2000 and is listed as a fortune 500
company. Last year it in fact made 372 on the list. Baosteel employs 15 000
workers and produced a turnover of RMB 7billion during 2005. Tin plate and
automobile manufactured components are supplied by overseas suppliers. Its
automobile share in the market amounts to 52% and its household appliances
amounts to 48% of the market.
Mr. Zhali further explained that Baosteel has a social responsibility toward
the underdeveloped rural sector. In this regard the company makes an effort to
make good business so that the tax amounts paid to the government are used to
alleviate the plight of those in the rural areas. A task team will be mobilized
to assess and assist in developing the rural areas. An educational fund has
been created that amounts to millions of RMB to assist children in the rural
areas, 40 schools have been built in 11 provinces and millions have been
donated to areas affected by natural disasters. Projects are also underway in
developing zones. Along with the 15 000 employees that the company employs,
Baosteel in fact sees to approximately 320 000 people in terms of a four member
family.
Baosteel investments are long-term contracts. 10% of the steel used is imported
from South Africa. South Africa offers quality resources and this is welcomed
by China. The delegation was then given a tour of this vast plant.
Presenter: Mr. Wu Yi, Vice Premier of
the Peoples Republic of China
10th China International Fair for Investment and Trade [CIFIT], Xiamen
The China International Fair for Investment and Trade (CIFIT) serves as a
bridge between China and the outside world enhancing co-operation and common
Development International Organizations which have supported the CIFIT include
the United Nations Conference on Trade and development (UNCTAD) , United
Nations Industrial Development Organization (UNIDO), Organization for Economic
Co-operation and Development (OECD), The International Finance Corporation of
the World Bank (IFC) and the World Association of Investment Promotion Agencies
(WAIPA), to name a few.
The topic for the opening of the Fair was “To adhere firmly to reform and
opening – up is an established basic national policy of China”. In Mr. Yi’s
speech he stated that during the late 70’s, with China starting it’s reform,
China’s economic and modernization drive has realized sustainable development
as well as achievements that have attracted worldwide attention. The GDP grew
from $140 billion USD in the early years up to $2.2 trillion USD in 2005, which
results in a 9.6 % growth on average annually. China has risen in global
rankings from 15th to 4th place. During this period
foreign trade has increased from 20.6 billion USD to 1.4 trillion USD,
representing an average annual growth margin of 17% and a rise in global
ranking from the 32nd to the 3rd place. The cumulative
amount of foreign direct investment inflow into China is nearly 660 billion USD
over the 27-year period, which makes China the largest Foreign Direct
Investment recipient amongst the developing nations for 15 consecutive years.
Thus Chinese enterprises have made a total of 51.7 billion USD worth of
investment overseas and the 2005 figure stands at 7 billion USD.
Furthermore, the sustainable and rapid economic development of China is
attributed to its reform and opening up and proactive and effective utilization
of foreign investment. The reform and opening up has brought about a marked
improvement in the Chinese peoples living standards and quality of life. China
has now reached a point of building a well off society, by increasing the pace
of its socialist modernization drive, its economic development is now standing
on a new historic starting point as this year, marks the first year of the
implementation of the 11th five year plan. This means by 2010 China
will have achieved noticeable improvement in energy efficiency, reduced the
energy consumption per unit GDP by 20% and doubled its per capita on the level
of 7.800 RMB. China will prioritize the optimization of foreign investment
composition and improve the quality of foreign investment. China will also take
active measures to create conditions necessary for becoming an international
outsource service provider. Added to this more attention will be paid to
improving the investment environment and protecting the legitimate rights and
interest of both domestic and foreign investors according to the law. Lastly
China will be firm in implementing mutually beneficial and win-win strategies
for trade enhancement and economic cooperation with other countries in the
world for shared development of all countries.
In conclusion, China will strengthen its c-operation with multilateral and
regional economic organizations; continue to promote trade and investment
facilitation in order to create an international environment conducive to
realizing common development and prosperity worldwide.
The China International Fair for Investment and Trade (CIFIT) ran over a period
of 3 days (08 September – 10 September). It was followed by a dinner, a
performance ceremony, Cocktail function and an expo at which the Department of
Trade and Industry was represented by the South African Mission. Added to this,
the DTI held an investment marketing seminar which the delegation supported.
Mr. Martins addressed investors and various dignitaries. He delivered a speech
entitled” the investment climate in South Africa”.
Members of the South African Parliamentary delegation felt that the visit was
rewarding, informative and interesting in the sense of exposing the committee
to the development of China and its drive to a market economy, and also proving
goodwill of mutual visits. The Chinese economic success is a combination of
government support for a market economy coupled with a strong work ethic. This
was inter alia illustrated by an answer to a question of what the Chinese
government does for the youth. The answer was that at 18 they are adults and
must basically get on with life and fend for themselves. Under 18 they are
youth and education and support is provided.
Speech by Chairperson, Mr. BD Martins
The 10th China International Fair for Investment and Trade
2006.9.8-11
Xiamen, China
China-Africa Cooperation Forum
Introductory Briefing on Investment Environment in South Africa:
Honourable chairperson,
Distinguished Heads of Delegations, Excellencies, Ambassadors and County
Representatives,
Esteemed Guests,
Mr Martins expressed, on behalf of his Parliamentary delegation, gratitude to
the Ministry of Commerce of the People’s Republic of China and the organizers
of the International Trade and Investment Forum for the hospitality and
kindness that has been accorded to the delegation.
He indicated that his delegation had visited China to participate in this
Investment Forum to promote South Africa as a destination for business and
investment; to facilitate trade and foreign direct investment, and to encourage
enterprises to develop transnational business partnerships.
In terms of the South African government’s Accelerated Shared Growth Initiative
(ASGI-SA), he said, the government would spend more than R350 billion ($50
billion) on infrastructure development, during the 2006 and 2009 period. This
initiative’s ultimate objective, he said, was to substantially increase growth
and to reduce unemployment and poverty by the year 2014.
Focused interventions would address Government’s Investment on infrastructure,
sector development, education and skills, as well as macro economic issues,
including the capacity of the state to implement these, he indicated.
Mr Martins further indicated that the Department of Trade and Industry (the
DTI) would over he next three years pay particular attention to opportunities
arising from the hosting of the 2010 FIFA World Cup. It would also pay
attention to a massive infrastructure development programme; small enterprise
development, and investment promotion amongst others.
He concluded by inviting the audience to view a short video on possible
opportunities in South Africa.
6. CONTRIBUTORS
Mr. Chai Zhijing, Chinese Ministry of Commerce
Mr. Liks Ramushu, Department of Trade and Industry, SA Embassy, Beijing
Mr. Rudu Conley, Department of Foreign Affairs, SA Embassy, Shanghai
Mr. Zhao Xin Xin, Deputy Director, Beijing Development Area/Zone
Mr. Guangsheng Shi, Chairperson: Economic and Financial Committee National Peoples Congress, Beijing
Mr. Yao Weigun, Director: Shanghai World Trade Organization Consultation
Centre, Shanghai
Mr. Zhou Yupeng, Vice Mayor: Shanghai’s Municipality,
Shanghai
Mr. Liu Xiaodong, Deputy General Manager: Shanghai Stock Exchange, Shanghai
Mr. Zhoa Zhali, Director: Baosteel, Shanghai
Mr. Wu Yi, Vice Premier of the Peoples Republic of China