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Is trade with China stifling Africa’s economy?

Gretchen Wilson Jun 21, 2006


KAI RYSSDAL: Chinese Premier Wen Jiabao is in South Africa today, Capetown to be precise, meeting with President Thabo Mbeki. It is stop No. 2 of a seven-country visit that he’s making. China has been boosting its trade ties with Africa the past few years, but some are worried cheap Chinese imports might sink the local economy. Gretchen Wilson reports.

GRETCHEN WILSON: South Africa is the continent’s economic powerhouse, yet Chinese imports to the country have increased by more than 260 percent in the last five years. Only three percent of South Africa’s exports go to China — and that’s mostly natural resources, such as aluminum, nickel and gold.

DR. NEVA MAKGETLA:“We tend to, unfortunately, import labor-intensive goods from places like China and export commodities which won’t create jobs.”

Dr. Neva Makgetla is an economist with the trade union federation COSATU.

MAKGETLA: As of 2005, China accounted for three-quarters of South Africa’s trade deficit, and the trade deficit itself is, you know, getting close to the US. It’s about 4.5 percent of GDP.

That’s a concern for any developing economy. But so are consumer prices. Locally-produced goods are sometimes more expensive than imports. Sophar Muchiundu sells cosmetics and hair accessories at Johannesburg’s busiest taxi station.

SOPHAR MUCHIUNDU: They come from China, and you know – all of these things, they don’t last, of course.

But they are cheaper, and she says African consumers have come to expect the low prices on what used to be luxury items.

MUCHIUNDU: You can get something expensive here, they won’t buy it. It will stay there for months, but when you get something cheaper they’ll buy. So you stock cheaper things for them.

COSATU’s Makgetla says this purchasing power will disappear if more jobs are lost in relatively new industries, such as goods manufacturing.

MAKGETLA: If we lose that capacity, we have nothing except mining, farming and tourism. Those things will never create the jobs we need in this society, and they won’t create a basis for a more balanced and sustainable development.

Both sides want to sign a trade agreement. Today’s talks will include a focus on South Africa’s waning textile industry. It has shed tens of thousands of jobs in the last two years alone.

Earlier this month, China agreed to temper the growth of its textile exports to South Africa, but some view this as a few sandbags against a flood and say long-term negotiations are far from over.

In Johannesburg, I’m Gretchen Wilson for Marketplace.

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