China
Agoa trade deal talks: South Africa will need to carefully manage relations with the US and China
South Africa must navigate its economic relationships cautiously amid rising tensions between China and the US, particularly during the 2023 Agoa Summit, to protect its interests and strengthen diplomacy.
South Africa must tread carefully in its economic relationships to avoid being caught in the escalating tension between east and west, and more specifically China and the US. The country’s hosting, and the outcome, of the 2023 Agoa Summit should strengthen its role in diplomatic relations and contribute towards safeguarding the country’s economic interests.
From 2-4 November 2023, the US and 35 sub-Saharan African countries will meet in Johannesburg for the 20th Africa Trade and Economic Cooperation Forum (Agoa Forum). It entails strengthening trade and investment ties between the US and sub-Saharan Africa through the Africa Growth and Opportunity Act (Agoa), US legislation which provides various trade preferences to eligible countries in the region.
Given Russia’s continuing war in Ukraine and its rising tension with Nato, plus the China-US trade war, tensions between east and west are high. South Africa has come under attack for its non-alignment role in the Ukraine war. It refused to support UN resolutions condemning Russia. This resulted in some US congressmen pushing for the forum to be moved out of South Africa.
The country recently hosted the 15th Brics summit, which resolved to expand the Brazil, Russia, India, China and South Africa grouping to 11 member states. The enlargement will bolster Brics’ role as a geopolitical alternative to the west, which is dominated by the US. Might this be a direct challenge to American hegemony?
I have been researching major global economic developments, such as globalisation and the impact of the 2008 global financial crisis, for 20 years. This body of work shows the risks that come with behaviour like South Africa’s. The country could find itself in the middle of a tense situation.
South Africa needs to pull off an exceptional balancing act in managing its international relations in a sensible way that protects and advances its economic interests.
Note that the geopolitical tensions between China and the US are not just about trade disputes. They also include espionage, China’s Belt and Road Initiative, climate change and environmental issues, and tensions over Hong Kong, Taiwan and South China Sea disputes.
As a major source of infrastructure financing to sub-Saharan Africa, China is now the region’s largest bilateral official lender. Its total sub-Saharan African external public debt – what these governments owe to China – rose from less than 2% before 2005 to over 17% in 2021.
Agoa might present a challenge to China as competition for its own interests in Africa. China would like African countries to untie or loosen their agreements with the US. It is thus a good moment to take stock of the actual benefits South Africa has derived from the Agoa agreement with the US.
What Agoa is about
The Agoa agreement was approved as legislation by the US Congress in May 2000 for an initial 15 years. On 29 June 2015 it was extended and signed into law by then president Barack Obama for a further 10 years to 2025.
It will come into review again in 2024, hence the importance of the upcoming summit. Recently, Louisiana senator John Kennedy introduced a bill to the US Congress to extend Agoa by a further 20 years to 2045. This is a bid to counter China’s growing influence in Africa, and to continue to allow sub-Saharan African countries preferential access to US markets.
Agoa’s benefits to South Africa
In 2021, the US was the second most significant destination for South Africa’s exports worldwide, mainly thanks to Agoa. China took the top spot; Germany was third. The US ranked third as a source of South Africa’s imports, following China and Germany. In that year, the total trade volume between South Africa and the US reached its zenith at $24.5 billion, with a trade imbalance of $9.3 billion in South Africa’s favour.
Agoa offers preferential entry for about 20% of South Africa’s exports to the US, or 2% of South Africa’s global exports. The stock of South African investment in the US has more than doubled since 2011, amounting to US$3.5 billion in 2020. American foreign direct investment (FDI) in South Africa increased by over 70% over that period, to US$10 billion. This made the US South Africa’s fifth largest source of FDI in 2019. The US was its third largest destination for outward FDI.
US investment in South Africa is mainly concentrated in manufacturing, finance and insurance, and wholesale trade, which is vital for economic growth. American multinationals doing business in South Africa employ about 148,000 people.
More specifically, Agoa’s benefits include:
duty-free and quota-free access to the US market for a wide range of South African products. This benefits South Africa’s textile and apparel industry in particular. To sub-Saharan African countries, Agoa provides duty-free access to the US market for over 1,800 products. This is in addition to the more than 5,000 products that are eligible for duty-free access under the US Generalised System of Preferences programme
export diversification, especially of items such as agricultural products, textiles, and manufactured goods. This is vital for increasing export earnings, which help to improve South Africa’s balance of payments, particularly its trade account.
capacity building through technical assistance and programmes to help South African businesses meet US standards, thus becoming more competitive in the global marketplace.
economic development and poverty reduction, which aligns with South Africa’s developmental goals.
Balancing economic interests
China is the largest consumer of South African commodity exports, and thus a key influencer of the rand exchange rate. In addition, China and Russia’s planned move towards de-dollarisation (trying to replace the petrodollar system with their own system) puts American interests under threat. This means South Africa needs to carefully navigate its relations with the US and its Brics partners, China and Russia.
It will want to keep strong ties with the US through Agoa without getting into a difficult position between China and the US. The outcome of the November meeting will have serious economic implications.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
China
Navigating Turbulent Waters: Trust Between China and the Philippines
Despite a July 2024 deal ensuring Philippine resupply missions at Second Thomas Shoal, tensions with China persist, marked by confrontations and deep distrust, indicating potential for future conflict escalation.
Ongoing Tensions in the South China Sea
Despite a July 2024 agreement facilitating uninterrupted resupply missions to the contentious Second Thomas Shoal, tensions between China and the Philippines remain significantly high. Increased aerial and naval confrontations in August, compounded by longstanding mutual mistrust, hint at a precarious situation. Both nations are employing legal strategies alongside military maneuvers, while China’s recent maritime regulations and the Philippines’ military modernization efforts suggest a future marked by conflict.
Rising Provocations and Distrust
The situation deteriorated further in June 2024, when Manila accused Chinese forces of intercepting its boats and injuring a sailor. Although the July deal allowed for a resupply mission without incident, broader tensions persisted as China reportedly fired flares dangerously close to Philippine aircraft in August. The incidents at Second Thomas Shoal illustrate the deepening security crisis that has persisted since 2021, as China continues to challenge Philippine resupply efforts.
Potential for Escalation
While the recent agreement may offer temporary relief, it is unlikely to resolve the long-standing maritime disputes in the region comprehensively. The continuing misinterpretations of the deal and the profound distrust between the two nations suggest an ongoing trajectory of escalating tensions. As disputes over competing claims in the South China Sea intensify, the situation at Second Thomas Shoal serves as a volatile flashpoint for future conflicts.
China
Is life getting better for China’s tech billionaires?
Pony Ma, Tencent co-founder, is China’s richest person with over A$65 billion. Despite past crackdowns, his wealth indicates a potential market recovery, while maintaining state control over the economy.
According to the latest Bloomberg Billionaires Index, Pony Ma, co-founder of Tencent Holdings, is once again China’s richest person, now with a net worth of more than A$65 billion, placing him 27th globally.
Close behind him in the rankings are bottled water tycoon Zhong Shanshan, and Zhang Yiming, the main co-founder of tech giant ByteDance, which owns TikTok.
Only a few years ago, China’s ruling Communist Party launched a crackdown on billionaires and other business leaders. Some were publicly jailed. Others simply disappeared from public view.
Ma’s resurgence might seem like a positive signal of a more permissive market environment. But as we watch China’s private sector grow, we should remember it follows China’s unique playbook.
The ascent of Tencent
Ma’s wealth primarily comes from his stake in Tencent, which he co-founded in 1998 with its headquarters in Shenzhen. As China’s economy grew, Tencent became a world-leading internet and technology company.
Tech billionaire Pony Ma at a government meeting in 2018.
Song Fan/AP
Tencent is well-known for QQ and WeChat, which quickly became two of the most popular instant messaging apps in China and connect more than a billion people.
Tencent is also the largest video game vendor in China, with popular games such as “Honour of Kings” and “League of Legends”.
Last month, Tencent released “Black Myth: Wukong”, China’s first-ever “AAA” video game. AAA is a globally recognised gaming industry buzzword that refers to major, high-budget, standalone productions.
The much-hyped game surpassed 10 million sales across platforms within three days of its release, becoming one of China’s most successful games of all time.
The game itself draws on a 16th century Chinese novel called “Journey to the West” and features various Chinese landscapes. Its popularity aligns with Beijing’s ongoing efforts to boost China’s international cultural appeal.
China’s state-owned media outlet Xinhua highly praised the game for “telling Chinese stories with world-class quality” and offering a new way for global players to understand Chinese culture.
Ma’s fortunes reflect his company’s
This official appraisal means a lot. In previous years, Tencent has had a challenging time coping with Beijing’s strict gaming regulations.
In August 2021, China’s video game regulator announced policies to limit online gamers under the age of 18 to only one hour of play on Fridays, weekends and holidays. This was a major blow to China’s gaming industry, including Tencent.
In December 2023, Beijing introduced more legislation aimed at further capping the amount of money and time that could be spent on video games. The announcement resulted in a 12.4% drop in Tencent’s share price. But the company still promised to strictly implement any new regulatory requirements.
The success of ‘Black Myth: Wukong’ reflects an improving outlook for Tencent.
Andy Wong/AP
A cautionary tale
In China, complying with state regulations is important. Another Chinese tech billionaire, Jack Ma, faced the consequences of publicly challenging them.
In 2020, Jack Ma was poised to launch what was set to be the world’s largest initial public offering (IPO), raising about A$50 billion for his financial technology giant, Ant Group.
However, after he gave a speech in Shanghai harshly criticising Chinese financial regulators for outdated rules and excessive intervention, regulators halted the Ant Group IPO.
Citing concerns that Ant Group’s e-finance products encouraged unrestrained borrowing and investment, China ultimately suspended the IPO in late 2020.
Over the following years, Ant and its affiliate company Alibaba were slapped with billions in fines for alleged breaches of financial regulations.
Getting on the front foot
This phase marked a much stricter regulatory posture from China. The tech tycoons had to adapt to a new reality.
In 2021, Pony Ma publicly stressed the importance of tightly regulating internet businesses, including his own. He also proactively volunteered to meet with antitrust authorities.
Tencent downsized by divesting stakes in various sectors, and the government demanded a restructuring of its financial business.
Many of China’s other billionaires heeded lessons from Jack Ma’s troubles at Ant Group.
Alex Plavevski/EPA
The party remains the ultimate authority
China’s economy is a “socialist market economy”. That is, China’s government thinks of the market as a useful tool to achieve socialist objectives.
That doesn’t mean the private sector doesn’t play a huge role, but the government has long been cautious about the emerging market power of oligarchs as a potential threat to the party’s authorities.
Over past decades of reform and opening up, Beijing has been committed to unleashing market forces, encouraging private sector development and modernising its financial institutions. The precondition is that the state should maintain the ultimate authority to regulate and mobilise market resources.
However, its economy has been stubbornly sluggish post-COVID. The clampdown on the private sector has undermined the confidence of many investors and entrepreneurs, which is crucial for restoring China’s economic vitality.
Last year, Beijing introduced a 31-point action plan in response, aiming to make the private economy “bigger, better and stronger”. Hours after its release, Pony Ma publicly praised the government’s move as “encouraging and inspiring”.
Could spring now be coming for China’s private sector? Perhaps, but only on China’s terms.
Remember, market development is always a means for the state to achieve its own ends. This will never be a story of the market growing while the state steps back.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
China
Zhejiang Province Increases Marriage Leave to 13 Days
On September 27, Zhejiang Province expanded marriage leave from 3 to 13 days for legally married employees. The new regulations ensure continued pay and benefits during leave and address demographic challenges by encouraging population growth. Businesses must update internal policies accordingly.
On September 27, the 12th meeting of the Standing Committee of the 14th Zhejiang Provincial People’s Congress approved the Zhejiang Province Marriage Leave Regulations (hereinafter referred to as the “Regulations”), extending the marriage leave to 13 days from three days.
According to the Regulations, employees who legally register their marriage are entitled to 13 days of marriage leave, excluding national statutory holidays and rest days. During the marriage leave, employees’ wages, bonuses, and other benefits will continue to be paid by their employers.
Notably, to ensure a smooth transition between the old and new leave regulations and to minimize disputes following the implementation of the new rules, the Regulations state that employees who registered their marriage within one year before the implementation of the new regulations and have not yet taken their marriage leave will be entitled to the new 13-day leave. Those who have already taken their marriage leave can supplement it according to the new regulations.
Businesses with operations in Zhejiang province are advised to amend their internal leave policies and employee handbook as soon as possible.
The extension of marriage leave in Zhejiang Province is part of a broader effort to support population growth and address demographic challenges. The province has seen some positive effects from its initial fertility support policies, which have helped to slow the sharp decline in birth rates.
*Granted to those who take pre-marital checkups, which involve being checked for any health conditions that will affect childbirth.
| This article was first published by China Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to info@dezshira.com for more support. |
Read the rest of the original article.
- Navigating Turbulent Waters: Trust Between China and the Philippines
- Is life getting better for China’s tech billionaires?
- Zhejiang Province Increases Marriage Leave to 13 Days
- China ETFs Celebrate Beijing’s Stimulus Initiative
- From Bubble Tea to Business Partnerships: Exploring China-ASEAN Trade Integration
- With China seeking AI dominance, Taiwan’s efforts to slow neighbor’s access to advanced chips needs support from the West
