Department of International Relations and Cooperation

BRANCH ASIA AND MIDDLE EAST

Briefing on RSA’s Relations with the PRC

Parliament

26 May 2010

“Seek truth from the facts”

“Truth is to be found in practice”

“Cross the river by feeling for the stones”

“To make revolution and build socialism we need

large numbers of path-breakers who dare to think,

explore new ways and generate new ideas”.

Deng Xiaoping, 1978

The World in 2050

“The three largest economies in the world

by 2050 will be China, followed by a closely

matched America and India some way behind,and then Brazil, Mexico, Russia and Indonesia”

“Goldman Sachs Projection”

The World in 2050 (cont)

Overview

• PRC’s Foreign Policy

• PRC’s involvement in Africa

• PRC’s Agenda in South Africa

• Evolution of SA-PRC relations

• SA Foreign Policy Instruments

• SA-PRC Key Agreements

• SA-PRC Economic Relations

• Shanghai 2010 World Expo

• SA- PRC Future Relations

• Challenges

PRC’s Foreign Policy

Macro Trends in the North East Asian Region:– Rapprochement China, Japan, Korea (Annual Trilateral Summit

since 2008)– Rapprochement China-Taiwan (ECFA-Economic Cooperation

Framework Agreement)– Increased competition China-USA

PRC’s Foreign Policy (cont)

Long Term Diplomatic Priorities:

– Sovereignty and Territorial Integrity– Economic Development – International Status

PRC’s Foreign Policy (cont)

• Sovereignty and territorial integrity

– Promote unification with Taiwan (Cross-Straits Rapprochement taking place)

– China shares land borders with 14 countries– Coastline 14 500 km long– Territorial disputes with Japan, India – Internal threats (Tibet & Xinjiang)– Modernisation of Chinese People’s Liberation Army

PRC’s Foreign Policy (cont)

• Economic Development:- To achieve China’s revival as a “Great Power”- Economic prosperity replaced ideology (“socialist market

economy”)

• International Status:- Respected “Great Power” with global influence- Challenge US influence but do not want to displace US at this

point in time, due to domestic challenges and diverting of resources from national development

- Supports a multi-polar world in which US power is constrained

China’s involvement in Africa

• Historical solidarity with Africa- Political support in Multilateral fora

• Forum for China-Africa Cooperation (FOCAC)- Key mechanism for promoting cooperation (The key priority areas 2009 -2012)

1. Infrastructure development in Africa: (mainly hydro-electric).2. Agriculture3. Natural Resources and Energy exploration and extraction4. Investment and Business Cooperation 5. Trade: removal of barriers to trade and investment (administrative, customs, quarantine, etc.), and the

establishment of trade dispute mechanisms, through friendly multilateral engagements 6. Finance: Encouraging closer Chinese collaboration with the African Development Bank and regional

development banks, as well as encouraging Chinese commercial banks to establish their presence in most African countries.

7. Transport: improve air and shipping links between the PRC and Africa to enhance cooperation with each other.

8. Science, Technology and Information Communication Technology: provide training and info exchange

China’s involvement in Africa (cont)

• Strategic competition among major powers

- Energy (oil from Sudan, Chad and Nigeria, Congo and Angola)

- Mineral resources (Ghana, Gabon, DRC, Zambia, Zimbabwe and SA)

- Access to markets for Chinese products

- China-Africa Development Fund (US $ 5 billion)

China’s involvement in Africa (cont)

• South Africa to finding synergies between the NEPAD and FOCAC to ensure the Consolidation of the African Agenda.

• South Africa to co-host the 5th FOCAC Ministerial scheduled for 2012

• South Africa to host the FOCAC Ministerial in South Africa in 2015.

PRC Agenda in SA

• Energy security (SASOL technology)

• Mineral security (Iron-ore, chrome, manganese)

• Access to markets

• Support for PRC in international organisations

• Understands SA role and influence in Africa

• SA attractive investment base for African market

• Leverage existing networks of SA companies

Evolution of SA-PRC RelationsBilateral Partnership:

• One China Policy December 1997• Diplomatic relations established January 1998• Pretoria Declaration on Partnership April 2000

• Bi-National Commission established 2001• Strategic Partnership 2004• Programme for Deepening Strategic Partnership June 2006

• Comprehensive Strategic Partnership 2010 (agreed in principle)• Proposed State Visit by Pres. JG Zuma (August 2010)

South African Missions in PRC

Evolution of SA-PRC Relations (cont)

• Multilateral partnership:

- Support for SA non-permanent seat in UNSC (2011-2012) - Common vision on Climate Change (BASIC grouping)- South-South Cooperation (G77 + China & New Africa Asia

Strategic Partnership- NAASP- Support for SA’s BRIC membership- Cooperation in the G20

SA Foreign Policy Instruments

• Bi-National Commission - Deputy President Motlanthe- Vice President Xi Jinping- Fourth Plenary of BNC to be held in November 2010 in SA- Review BNC process - Further align SA’s Five National Priorities- Three Sectoral Committees: Foreign Policy Commission, Joint Economic Trade

Commission, Human Resource Development Commission- New sectoral Committees to be proposed e.g. Mineral and Energy Resources

• Strategic Dialogue Forum- At Deputy Foreign Minister level will be held in PRC later in 2010

• State Visit- Comprehensive Strategic Partnership Agreement to be signed

SA-PRC Key Agreements

• 30 December 1997

Joint Communiqué between the Government of the People's Republic of China and the Government of the Republic of South Africa on the Establishment of Diplomatic Relations

• April 2000

The Pretoria Declaration on the Establishment of the Partnership Between the People's Republic of China and the Republic of South Africa

• December 2001

Exchange of Notes on the Establishment of Bi-National Commission between the Government of the People's Republic of China and the Government of the Republic of South Africa".

• 21 June 2006

Programme of Cooperation on Deepening the Strategic Partnership

SA-PRC Agreements

• December 2001

Exchange of Notes on the Establishment of Bi-National Commission between the Government of the People's Republic of China and the Government of the Republic of South Africa"

• 21 June 2006

Programme of Cooperation on Deepening the Strategic Partnership

• 28 August 2006

Memorandum of Understanding on Promoting Bilateral Trade and Economic Cooperation.

• 24 September 2007

Agreement on Co-operation in the Minerals and Energy Sector

• February 2010 (ongoing)

In the process of drafting and negotiating a Comprehensive Strategic Partnership Agreement

SA-PRC Economic Relations

• Joint Economic Trade Commission (JETC) sub-committee of Bi-National Commission

• Total Trade R119,7 bn (2009)• Largest export destination by country R48,7 bn in 2009• Largest import partner R70,8 bn in 2009

• Trade imbalance –R22,2 bn

• Tourism increased

Trade with People’s Republic of China (SARS)

SA-PRC Economic Relations

• Chinese investments in SA increased mainly in:

- Banking e.g. Industrial and Commercial Bank of China –Standard Bank China Construction Bank- FirstRand Bank and IDC

- Mining sector e.g. Sinosteel Corporation- ASA Metals, Jiuquan Iron and Steel (Jisco)- IFM , Minmetals , Zijin Mining Group

- Cement e.g. Jidong Development Group, CADF/ Continental Cement and Wiphold

- Construction e.g. Covec and Citic Construction and COMPLANT- Electronic goods assembly e.g. Hisense , Sinoprima, FAW , Hence

Trade , ZTE , Huawei etc

SA-PRC Economic Relations

• SA investments in China include:

-Food & beverage e.g. SABMiller- China Resources Enterprices CRE, Metspan, Spur

- Energy e.g. SASOL China- Shenhua Group

- Luxury yachts e.g. Robertson & Crane- Flying Eagle

- Media e.g. MIH (NASPERS)

-Banking & insurance e.g. Hollard, Old Mutual, Standard Bank, FNB and Discovery Holdings

-Mining & consulting e.g. Anglo American , Exxaro, Batemen Engineering, Beijing Axis

-Paper & pulp e.g. SAPPI- Jiangxi Chenming Paper Co. Ltd

The Shanghai 2010 World ExpoTheme: The Rise of a Modern Economy – Ke Nako!

Budget: R106 millionMONTH THEME LEAD ORGANISATION

May South Africa’s contribution FIFA 2010 Football World Cup Technology and InnovationUrban and infrastructure Development

2010 FIFA loc

June Remodelling of communities in the city Fighting urban poverty (best practices in all provinces)Cosmo cities (Gauteng e.g. Alexandra)Inner city regeneration

The Department of Cooperative Governance and Traditional Affairs.

July A Modern Economy The Department of Trade & Industry

August A Modern Economy The Department of Trade & Industry

September Tourism and Heritage The Department of Arts & Culture/SA Tourism

October Environment and Climate Change The Department of Science & Technology /Department of Water and Environmental Affairs

SA- PRC Future Relations

• Align 5 National Priorities in CSPA• Future Procurement Missions (to address trade imbalance)• New Trade Capacity (e.g. Consulate-General in Guandong

Province)• Investment for IPAP2• Skills Development• Increase Tourism• Science and Technology , especially Green technology transfer• Implement Sharm El Sheik Action Plan for 2010-2012 • Preparations and coordination of SA hosting FOCAC ministerial in

2015

SA-PRC Future Relations (cont)

SA Competitors in Chinese Market

• Resource exporters e.g. Australia, Canada, etc.• High value exporters e.g.

• The West and ASEAN manufacturers• India and South Korea (ICT)• Australia (mining technology and services)• Brazil (aerospace, automotives)• Vietnam (automotives)• Singapore (banking services)

CHINA CONSUMER OF “LAST RESORT”

SA-PRC Future Relations (cont)Implementation of Five National Priorities:

• EDUCATION AND TRAINING: -FOCAC: PhD students to PRC; 20:20 University-SA-PRC: 200 artisans training through Umsobomvu Youth Fund, 10 short term courses and

long term courses for post-graduates eg Agriculture, construction, IT etc; upgrading of FET Colleges and vocational training; and 28 new education projects

• FIGHT AGAINST CRIME

-SA-PRC: Organised crime cooperation

• HEALTH-FOCAC: Hospital infrastructure development-SA-PRC: Traditional medicine

SA-PRC Future Relations (cont)

CREATING DECENT JOBS

-Major trading partner-Major investor

-FOCAC: China-Africa Development Fund US$ 5 billion.

-SA-PRC: IDC loan US$ 50 million to re-capitalise export finance loan book, loan to DBSA; purchase by ICBC of stake in Standard Bank.

-Technology transfer-IPAP 2-Sign and Ratify CSPA

LAND AND RURAL DEVELOPMENT

-FOCAC: Agricultural demonstration centres and infrastructure eg grain storage facilities in Zambia-SA-PRC: Aquaculture Gariep Demonstration Project

CHALLENGES

• Trade deficit with China • Beneficiation of SA minerals- diversification of exports• More value-added/local sourcing in manufacturing processes in SA• Market access for SA agricultural value added products (mainstreaming into

bilateral relations)• More FDI e.g. greenfield projects like platinum beneficiation cluster• Tourism impeded by perception of crime• Lack of capacity in AU/RECs to take up FOCAC opportunities• Realigning our economic diplomacy model in Asia (increased role for

DIRCO / private sector /Chambers of Business / Export Councils?)

Challenges (cont)

• Skills transfer strategy• Develop African project implementation capacity to access funding

from FOCAC• Linking IPAP2 to investment and export strategies.• Concluding the Comprehensive Strategic Partnership Agreement

with China• Lack of trade agreements with North East Asian region• Proliferation of Free Trade Agreements with China / Japan/ South

Korea in Asia- could exclude SA products from supply chains in Asia

SA-PRC Future Relations

Bilateral Free Trade Areas (FTAs) have developed into ASEAN + FTAs; and ASEAN Cooperation into ASEAN+3 and ASEAN+6 initiatives, as well as FTAs between ASEAN and China; Japan; and ROK

• China-ASEAN Free Trade Area - 1 January 2010• Japan-ASEAN Free Trade Area - 1 December 2008• Korea-ASEAN Free Trade Area - 1 July 2006 • APEC Free Trade Area by 2015 (BOGOR Goals)

ASEAN + FTAs

Challenges

NEW LEADERSHIP IN CHINA BY 2012?

• 5th Generation leaders in China coming to the fore• Generation of “Zhiqing” (“educated youths”, who toiled in country-side and

factories during Cultural Revolution, and then attend college)• Possible policy shifts?• Impact on the Asian region?• Front- runners

Xi Jinping (55 yrs) Li Keqiang (53)

SA- PRC Future Relations (cont)EVENTS

• PRC: State Visit to PRC mid - 2010 ( August)• 4th SA-PRC BNC in November 2010 in SA. Dep Pres to

chair • SA-PRC Strategic Dialogue Forum in PRC (Deputy

Minister) • Shanghai 2010 World Expo: 1 May 2010 - 30 October

2010• Preparations to co-chair FOCAC in 2012 & to host

FOCAC Summit in SA - 2015

Thank you