Mr. Ismail Dockrat

Mr. Martyn Davies

Ladies and Gentlemen,

I would like to begin by expressing the appreciation and warm congratulations to WESGRO and the Center for Chinese Studies for holding this seminar. Thank you for this opportunity to share with you my observation on China's economic development and the role that Western Cape plays in China – South Africa trade.

I believe that China's fast economic growth is not an unfamiliar story to you. If you "google " Chinese Economy in web, tens of millions of information would flush out.

During the past 26 years from 1978 to 2004, China's economy grew at an average annual rate of 9.4%. China's GDP jumped from 147 billion US dollars to over 1650 billion US dollars. China has become the 6th largest economy in the world. China's foreign trade increased from 20 billion US dollars to 1154 billion US dollars. China's ranking in the world trade was advanced from 32nd to the 3rd, after US, Germany.

In 1978, no Foreign Direct Investment (FDI) was attracted to China. In the past several years, China attracted about 40 to 50 billion US dollars of FDI annually and ranked the first among the developing countries and only next to the U.S in the world.

Today, More than 400 out of the top 500 enterprises of the world have set up their presences in China. Nowadays, China has been renowned as the main workshop in the world. China is the largest producer of over 80 categories of commodities, including color TV sets, washing machines, refrigerators, air-conditioning sets, electrical fans, microwave ovens.

How could Chinese economy make such a rapid growth? In my opinion, the main reasons are as follows:

First, China has successfully maintained political and social stability, which, I believe, is a prerequisite for economic development and social progress in any country. To maintain political and social stability is a priority for the Chinese Governments at all level.

Secondly, Our economic achievements are also attributed to the successful implementation of the reform and opening-up policy.

We practiced a planned economy for 30 years before 1978, after that the Chinese government started a national drive of reform and opening-up with the aim of changing the planned economic system to a market economic system, changing a closed or partially closed economy to an open economy, an economy integrated with the global economy.

Thirdly, we have been implementing a strategy of invigorating China through education and science and technology. The Chinese government attached great importance to and allocated a growing amount of resources for development of education and the research and development of science and technology. Remarkable achievements were scored in such fields as information technology, life science and aeronautical and space technologies. It was estimated that technology contributes to 30% of the economic growth.

Though China has obtained impressive achievements in economic growth, it is still faced with acute problems, difficulties and challenges.

First, though China's economic growth rate is quite high, but its foundation is still weak and population is too huge. China's per capita GDP was US$ 1269 in 2004. It is an impressive figure for us in view of the poor foundation we had, but China still ranks behind the 100th place in the table of per capita GDP of 207 countries and regions of the world. It is much lower than South Africa.

Second problem, China's rapid economic growth had been achieved with, excessive consumption of energy and resources, environmental degradation and neglect of social development. From 1978 to 2004, China's GDP increased 10 times while consumption of mineral resources increased 40 times. For every 1 US dollar worth of GDP production, the amount of energy China used is four times that of the US. China's per-capita productivity is only one fifth of that of the developed countries. It is high energy and resources consumption rather than technological progress that has contributed to China's economic growth. It is estimated that if all those negative factors were taken into account, China's GDP growth would be reduced by 2%.

Third problem, the development is uneven in terms of regions. The economy has been growing much faster in the Eastern regions than the Western and Northeastern regions. The gap between them is big. The development in urban and rural areas is uneven.

Fourth problem, unemployment pressure is high. At the end of 2004, the registered jobless in cities were 8 million and the unemployment rate was 4.3%. Plus the laid-off workers from the state-owned enterprises, the actual unemployment rate is estimated to reach 10%. In rural area, one third of the population is surplus.

To handle these problems, the Chinese Government realized that its economy should grow in a sustainable and coordinated manner and that proper balance should be maintained between economic growth and social development, between human life improvement and environment conservation, between rural and urban areas, between Eastern and Western regions and between domestic and international concerns.

China's rapid economic growth, including its achievements, difficulties and new strategies and plans for future development, all offers a lot of business opportunities to the world. Let me explain a few opportunities China offers to the world.

First, China has a vast market. China has a big population of 1.3 billion, and it's estimated to have over 100 million middle class. With rapid economic growth, Chinese people have more money at their disposal and their purchase power and affordability rise sharply.

For instance, the sales of automobile in China registered a new record of 5.15 million in 2004. A total of 14.2 million PCs were sold in China in 2004.

Second, China is a big importer. From 1978 to 2004, China's import increased 15% annually, which is 10% faster than the world average.

Third, since China's admission into the WTO, we have amended about 2300 laws and regulations, which were deemed incompatible with WTO requirements. We have reduced the overall tariff level from 15.3% to 12%. The average tariff on manufactured goods has been decreased to 9.5% and that for agricultural product 15.6%.

China has opened its banking, commercial, agricultural wholesale and retail sectors and will soon open other service sectors to foreign capital.

Fourth, We have rich resources of industrious, skilled, disciplined, efficient and cheap labor.

Fifth, there are many specific projects, which provide many specific business opportunities. For instance, China is going to host the Olympic games in Beijing in 2008, and the World Exposition in Shanghai in 2010. It is estimated that the overall investment demand for the Olympic Games will exceed 181 billion dollars, which will generate a lot of business opportunities.

How to view China's rapid economic development? Will China's rise pose a threat or provide opportunities? To have a correct answer to this question, let us first look at what impact China's economic development has made to Asia and the world.

China's strong economic performance has stimulated economic growth in the rest of Asia. For instance, last year, exports to China accounted for 32% of Japan's total increase in exports, 36% of South Korea's. China's dazzling economic growth has become the principle engine for the Asian economic growth.

China has also been an important contributor to the global economy. According to World Economic Lookout, In the course of 8 years between 1995 and 2002, China's growth accounted for 25% of the growth of the world economy, higher than America's 20%, EU's 15% and Japan's 2%, though China's GDP accounted for only 4% of the global output.

China will follow a peaceful development path. China's development depends on regional and world peace, cooperation and common development. International economic competition and trade is not a "zero-sum" game. It can and should become a win-win match for all. In its economic relations with other countries, especially developing countries, China implements a principle of mutual benefits, mutual assistance, common development and common prosperity. China's achievement will not be obtained at the expense of others. China hopes to achieve common development and common prosperity with its economic partners.

Finally, I would like to say a few words about the economic relations between our two countries.

Since China and South Africa established diplomatic relations 7 years ago, our trade and economic cooperation are growing with a robust momentum. The bilateral trade volume has grown from US$1.56 billion in 1998 to over 5.91 billion US dollar in 2004.

South Africa is the largest trading partner of China in the African continent, with the bilateral trade volume holding 21% of the total volume between China and Africa. For SA, China is the second largest trading partners in Asia, 8th largest export market, and 5th largest source of import.

Taking the Western Cape Province for instance, the total trade volume between Western Cape and China has hit R5.1 billion in 2004, China has become the second largest trade partner and the fourth largest investment source of Western Cape.

Although the bilateral trade between our two countries has developed remarkably, it only accounts for about 3% of SA's total foreign trade, and less than 1% of China's total. The growth rate of the bilateral trade is lower than that of the foreign trade of China as a whole. Hence there should be space for development. There should be a lot to do in further promoting the bilateral trade

According to incomplete statistics, there are more than 300 SA companies engaged in more than 70 investment projects in China with a contractual value of US$300 million, covering a wide range of fields, from harbor construction, beverage manufacturing to metal and building material, etc.

Chinese investors, on the other hand, have by no means been lagging far behind. About 100 state-owned Chinese companies have invested in SA with a total investment of around US$200 million, besides more private Chinese companies and enterprises have been established in SA. Their operation covers a wide range of business, from agriculture, to financial and transportation services, to manufacturing in the fields of light industrial, textile, food, auto and electrical household appliances, to resources exploration. They have all created jobs for the local people and revenue for the local government.

I have noticed some arguments aroused in recent days concerning the influx of Chinese goods, especially clothing and textile. The cheap Chinese commodities provide wider choices and lower price for the consumers and help to increase the profits for the traders and life qualities of consumers, but it caused some local factories closed down and some workers out of work.

There exists in China huge profitable business opportunities and the South African entrepreneurs are welcome to explore, to seize and to capitalize these opportunities and achieve economic growth and prosperity together with China.

Western Cape Province has its distinctive advantage which is blessed with rich tourism resources, abundant financial capital and advanced management experiences, I am sure that Western Cape could play a major role in the Sino–SA economic cooperation.

May I conclude by wishing this China Business Seminar a complete success!

Thank you!