The Political Economy of Sino–South African Trade and Regional Competition [1 ed.] 3030980758, 9783030980757

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The Political Economy of Sino–South African Trade and Regional Competition Bhaso Ndzendze

International Political Economy Series

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The global political economy is in flux as a series of cumulative crises impacts its organization and governance. The IPE series has tracked its development in both analysis and structure over the last three decades. It has always had a concentration on the global South. Now the South increasingly challenges the North as the centre of development, also reflected in a growing number of submissions and publications on indebted Eurozone economies in Southern Europe. An indispensable resource for scholars and researchers, the series examines a variety of capitalisms and connections by focusing on emerging economies, companies and sectors, debates and policies. It informs diverse policy communities as the established trans-Atlantic North declines and ‘the rest’, especially the BRICS, rise. NOW INDEXED ON SCOPUS!

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Bhaso Ndzendze

The Political Economy of Sino–South African Trade and Regional Competition

Bhaso Ndzendze Johannesburg, South Africa

ISSN 2662-2483 ISSN 2662-2491 (electronic) International Political Economy Series ISBN 978-3-030-98075-7 ISBN 978-3-030-98076-4 (eBook) https://doi.org/10.1007/978-3-030-98076-4 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: © Rob Friedman/iStockphoto.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

About This Book

Observing that Asia is widely predicted to be the new economic center of gravity for the new century in international relations, particularly in terms of trade, by the middle of the century, it similarly follows that China ranks above all the other countries in terms of trade relations with South Africa. This book comparatively examines the China–South Africa trade relationship over the twenty-year (1998–2018) period through the prism of four other relationships South Africa has with countries that are China’s contentious neighbors in South Asia and the Asia-Pacific (or Indo-Pacific) and observes a “differentiated engagement” between Pretoria and Beijing. Importantly, the four countries studied (Taiwan, Japan, India, and the US), have relations with China which can be described as ranging from ambivalent at best to adversarial at worst. At the same time, these countries have also aimed at increased trade relations with post-Apartheid South Africa, sometimes at China’s marginal expense, since 1998 (when Pretoria formed diplomatic relations with Beijing to Taiwan’s exclusion). The aim of the book is to therefore determine the role that this perceived competition has had in pushing China’s entry toward South Africa’s market and in turn opening up its own market to South African exporters and whether this continues to persist in the postGreat Recession period. Moreover, this book examines whether there is any validity to the notion that as Chinese imports to South Africa grew, they displaced the market access of those countries which initially had exports that were larger than China’s. This is where the modulating effect v

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ABOUT THIS BOOK

of capabilities and resources take effect however; as none of these countries are capable of winning a trade competition against China; this is due to China having had more years of continuous growth, having formulated its own niche product portfolio with which the other countries could not compete, and higher volumes of exports to South Africa when compared with Taiwan, Japan, India, and the US. In this way, the book directly examines—and provides fairly conclusive answers on—the role of competition (sometimes termed the “new scramble for Africa”) in Asian states’ presence on the continent. Yet in its findings, the book notes that South Africa’s market has been receptive to both China and its rivals, with all having seen mutual growths and mutual declines in consecutive years. The findings allow for the deduction of general patterns applicable to South Africa and peer economies.

Contents

1

1

Introduction: Differentiated Engagement

2

China and the Contemporary Asian Balance

35

3

Taiwan: The International Political Economy of the One China Policy

67

4

Japan: Economically Hot, Politically Cold

89

5

India: Between Two Southern Powers

113

6

United States: An Imaginary Scramble for Markets?

131

7

The European Union: Brexit Aftermaths and Divergent Futures

159

The Politics and Future of Differentiated Engagement

177

8

Appendices

191

Bibliography

195

Index

211

vii

Chronology of Key Events

Below is a concise outline of significant dates in the regional configuration of the Asia-Pacific and the China–Africa and China–South Africa relationships that are referred to in the book. 1868

1884 1895–1896 1911

1921 1936 1949

Meiji restoration in Japan sees Emperor of Japan once again centralize power and modernization of army and navy through German and British advice, respectively. Soon Japan becomes an expansionist regional power. China assumes control over Taiwan. First Sino–Japanese War won by Japan. China signs Taiwan over to Japan as part of post-war concession. Fall of the Qing Dynasty of China. China becomes a republic under the leadership of Dr. Sun Yat-sen, but virtually ran by different cliques in different regions. Formation of the Communist Party of China, which seeks to take over as central government. Japan takes over Manchuria. Start of the second Sino– Japanese War. End of Chinese Civil War with victory for Communist Party of China. Nationalist government retreats to Taiwan. Communist government declares a new

ix

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CHRONOLOGY OF KEY EVENTS

1955

1957 1962 1971

1978 1979 1984 1987 1994

1997

1998

1999 2000 2001 2003 2006

People’s Republic of China in the mainland. Taiwanbased Nationalist government maintains claims of representing all of China. Bandung Conference takes place in Indonesia. Attendees include primarily representatives from the global South. First significant meeting of African and Chinese leaders. Ghanaian independence. First sub-Saharan African country to gain independence. Sino–Indian war ends in Indian defeat, but with a Chinese retreat. With 70 votes, 25 of them from African countries, the PRC joins the United Nations General Assembly and Security Council. Under Deng Xiaoping, China pursues “Opening Up and Reform” policy. US and the PRC agree to a compromise that the status of Taiwan is to be determined in future. Meeting between ANC Oliver Tambo and Chinese leader Deng Xiaoping. First democratic elections take place in Taiwan. South Africa has its first democratic elections, with voting by the black adult population. ANC leader Nelson Mandela becomes president. Hong Kong returned to China by the British, under “One Country, Two Systems” deal which would see Hong Kong persist with its own legal code for the next 50 years. South Africa recognizes China over Taiwan. India conducts Pokhran-II nuclear test; Indian Prime Minister Atal Vajpayee declares India as a nuclear-capable state. Thabo Mbeki elected president of South Africa. China established the Forum on China–Africa Cooperation (FOCAC) to have summits held triennially. After the end of civil war, Liberia establishes diplomatic relations with the PRC. Chad establishes relations with the PRC. Senegal establishes relations with the PRC.

CHRONOLOGY OF KEY EVENTS

2007 2008

2009

2014 2015

2016

2018

xi

Election of pro-China Ma as president of Taiwan. Thaw in cross-strait relations. The PRC and ROC establish a “diplomatic truce,” vowing not to pursue each other’s allies. They also sign a major trade deal known as the Economic Cooperation Framework Agreement. Global recession. The PRC is virtually unaffected. ROC economy declines by more than 5%. China becomes the principal trading partner for South Africa. Jacob Zuma elected president of South Africa. China overtakes the US as the number-one country in purchasing power parity terms. FOCAC 6 takes place in Johannesburg. PRC President Xi Jinping announces a US$60-billion loan and aid package for African countries. The Gambia severs relations with the ROC, but the PRC refuses to form relations with the West African country. Election of pro-independence Tsai Ing-wen as president of Taiwan. The PRC moves to form relations with The Gambia. Sao Tome and Principe severs relations with the ROC, and establishes diplomatic ties with the PRC. Cyril Ramaphosa replaces Jacob Zuma as president of South Africa. May

September

Burkina Faso recognizes the PRC, rendering Swaziland the only country on the continent to maintain relations with Taiwan. 7th FOCAC summit. Unprecedented attendance by 43 African heads of state and government. Among others, China promises US$60-billion in concessional loans and aid to African countries, and Africa to be part of the Belt and Road Initiative (BRI).

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CHRONOLOGY OF KEY EVENTS

November

2019 January

Referendum held in Taiwan regarding the name under which the country is to participate in the Olympics. Some 60% reject dropping “China” from its name.

As part of his New Year’s Day message, President Xi Jinping urges imminent reunification of Taiwan and the mainland, and for external parties to refrain from the issue. Starting March

Protests in Hong Kong over a proposed law which would see criminal suspects extradited to the mainland. Bill is withdrawn in October.

Abbreviations and Note on Currency

Abbreviations ADB AfDB AIIB ANC AU BRICS CAD CCP CDB CGC CNPC CNPCIC CPA DPP DPRK ECFA ECOWAS EU FDI FOCAC FTA GDP GPA

Asian Development Bank African Development Bank Asia International Infrastructure Bank African National Congress African Union Brazil, Russia, India, China, South Africa China–Africa Development Fund Chinese Communist Party China Development Bank China Geo-Engineering Corporation Chinese National Petroleum Corporation China National Petroleum Corporation International Chad Comprehensive Peace Agreement Democratic Progressive Party Democratic People’s Republic of Korea Economic Cooperation Framework Agreement Economic Community of West African States European Union Foreign Direct Investment Forum on China–Africa Cooperation Free Trade Agreement Gross Domestic Product Agreement on Government Procurement xiii

xiv

ABBREVIATIONS AND NOTE ON CURRENCY

IMF ITC ITTO JSE KMT MCTU MoU NGO OBOR ODA PD PRC ROC ROK RSA RTA SACU SADC SARS SEF SOE UN UNMIL UNSC US USSR WEF WHA WHO WTO WWII

International Monetary Fund International Trade Centre International Tropical Timber Organisation Johannesburg Stock Exchange Kuomintang Party Malawian Congress of Trade Unions Memorandum of Understanding Non-Governmental Organization One Belt One Road Initiative Official Development Assistance Prisoner’s Dilemma People’s Republic of China Republic of China Republic of Korea Republic of South Africa Regional Trade Agreement Southern African Customs Union Southern African Development Community South African Revenue Service Straits Exchange Foundation State-Owned Enterprise United Nations United Nations Mission in Liberia United Nations Security Council United States Union of Soviet Socialist Republics World Economic Forum World Health Association World Health Organization World Trade Organization World War II Note on Currency

Although the majority of the amounts are listed in US dollars, where appropriate the amounts are listed in South African Rand (ZAR). The corresponding historical values are in Appendix B.

List of Figures

Fig. 1.1

Fig. 1.2 Fig. 1.3 Fig. 1.4 Fig. 2.1

Fig. 2.2 Fig. 2.3

Fig. 2.4

Regional shares in global FDI (Source UNCTAD, FDI/MNE database. Available at: www.unctad.org/fdistatistics/, last accessed: 17 November 2019) Asia’s share of world trade, 2001–2016 (Source Author) Total South African imports from Asia, 2001–2018 (Source Author) Total South African exports to Asia, 2001–2018 (Source Author) Representation of imperial China’s conception of the world (Source Author. See also Adapted from Sheng, Shirley Ye and Shaw, Eric H. (2007). ‘The Evil Trade that Opened China to the West,’ CHARM ) Retaliatory tariffs between China and the US, Q1 2019 Asia–Pacific countries’ trade interdependence with China, 2017 (Source World Trade Organization [2017a] and US Census Bureau [2019]) South African relevance of Asia–Pacific competition

13 14 14 15

44 58

61 64

xv

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LIST OF FIGURES

Fig. 3.1

Fig. 4.1

Fig. 4.2

Fig. 5.1 Fig. 5.2

Fig. 6.1

Fig. 7.1 Fig. 7.2 Fig. 7.3 Fig. 7.4

Fig. 7.5

Fig. 7.6

Annual growth and decline in South African exports to the ROC and Hong Kong, SAR, 2002–2017 (Source TradeMap [2019], https://www.trademap.org/Bilate ral_TS.aspx?nvpm=1%7c710%7c%7c344%7c%7cTOTAL% 7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap.org/Bilateral_TS.aspx?nvpm= 1%7c710%7c%7c490%7c%7cTOTAL%7c%7c%7c2%7c1% 7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author) South African, Ugandan, and Kenyan imports from Japan vs the PRC, 2007–2017: incidence summary (Author’s own calculations) South African, Ugandan and Kenyan imports from Japan vs the PRC, 2007–2017: generalized incidence summary mean scores (Author’s own calculations) Growth and decline in South African exports to China and India, 2002–2017 Generalized incidence summary of South African exports to China and India, 2001–2017 (Source TradeMap [2019], ‘South Africa’s exports to China’ https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c156%7c%7cT OTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap [2019] ‘South Africa’s exports to India’. Calculations by author) South African and Kenyan imports from the US vs the PRC, 2007–2017: Generalized incidence summary (Source Authors’ own calculations) Total exports to South Africa (in billions of US$) (Data sourced from UN Trade Map) Electrical machinery exports to South Africa (in billions of US$) (Data sourced from UN Trade Map) Ceramic products to South Africa (in billions of US$) (Data sourced from UN Trade Map) Changes in exports of electrical machinery to South Africa (in %), 2007–2018 (Data sourced from UN Trade Map. Calculations by author) Changes in exports of ceramic products to South Africa (in %), 2007–2018 (Data sourced from UN Trade Map. Calculations by author) Changes in total annual exports to South Africa (in %), 2007–2018 (Data sourced from UN Trade Map. Calculations by author)

82

108

109 121

126

153 166 167 167

168

169

170

LIST OF FIGURES

Fig. 8.1

Fig. 8.2 Fig. 8.3 Fig. 8.4

New FDI and Ease of Doing Business index score, 2009–2017 (Source Ndzendze, Bhaso, ‘World Bank “Doing Business” index scores and FDI influx: findings from four African countries, 2009–2017,’ Transnational Corporations Review, Forthcoming [2020]) Vietnamese imports from South Africa, 2001–2018 (Source TradeMap dataset [2019]) ROK imports from South Africa. 2001–2018 (in billions of US$) (Source TradeMap dataset [2019]) Average share of technology in exports, 2015–2019 (Chart by author, based on data sourced from the UN [2020] and the UJ 4IR and Digital Policy Research Unit [2021])

xvii

183 184 187

188

List of Tables

Table 2.1 Table 2.2 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 4.1 Table 4.2

Table 4.3

Table 4.4

Southeast Asian countries’ GDP per capita (in thousands of US$) Southeast Asian states by population South African exports to the ROC, and to Hong Kong, SAR Averaged movement in South African exports to the ROC, and to Hong Kong, SAR Averaged scores of South African exports to the ROC, and to Hong Kong, SAR, 2001–2008 Averaged scores of South African exports to the ROC, and to Hong Kong, SAR, 2001–2017 Total South African exports to the PRC, 2001–2017 Annualized statistical movement in South African exports to the PRC, 2002–2017 The GDP growths of the PRC and Japan in the 2007–2017 period Dataset of total annual South African imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual South African imports of ceramic products from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Kenyan imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

47 48 79 81 83 83 84 85 98

102

102

104

xix

xx

LIST OF TABLES

Table 4.5

Table 4.6

Table 4.7

Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 6.1 Table 6.2

Table 6.3

Table 6.4

Table 6.5

Table 6.6

Table 6.7

Table 7.1 Table 8.1

Dataset of total annual Kenyan imports of iron and steel from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Ugandan imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Ugandan imports of construction equipment from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) Total South African exports to the PRC and India, 2001–2018 Annualized growth and decline in South African exports to China and India Balance of trade in South African exports to the PRC and India South African exports of iron and steel to China and India, 2001–2017 South Africa’s exports of machinery to China and India, 2001–2017 GDP growth of China and the US Dataset of total annual South African imports of vehicles from the US and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual South African imports of medical equipment from the US and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual South African imports of mineral fuels from the US and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Kenyan imports of textiles from the US and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Kenyan imports of cereals from the US and the PRC between 2007 and 2017 (in ‘000 of US$) Dataset of total annual Kenyan imports of chemical products from the US and the PRC between 2007 and 2017 (in ‘000 of US$) PRC and EU GDP growth rates, 2007–2018 Annual growth in South African value-added manufacturing, 2009–2018

104

107

107 119 120 122 124 125 144

147

147

147

149

150

150 160 182

CHAPTER 1

Introduction: Differentiated Engagement

On two different state visits to China, twelve years apart, South African presidents have expressed similar sentiments about the country’s significance for their country and continent. First, on the 11th of December in 2001, Thabo Mbeki articulated China’s unique partnership and the promise such cordiality meant for resolving conflict and socio-economic challenges: In China, we have an invaluable partner as we strive for a world that will boldly and comprehensively deal with some of the fundamental sources of conflict today, in particular the socio-economic deprivation of billions of our brothers and sisters across the world.1

Over a decade later, another South African head of state stood at a podium in the elite Tsinghua University and reiterated the same sentiments, recognizing China’s then universally apparent status as a major power:

1 News24. 2001 (11 December). ‘China a Key Partner: Mbeki,’ News24 Archive. Available at: https://www.news24.com/SouthAfrica/China-a-key-partner-Mbeki-20011211 (Last accessed: 18 November 2019).

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_1

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The emergence of China as a power among others gives or offers an opportunity to African countries to be able to free themselves from the shackles that are really colonially designed.2

Regardless of whether Presidents Mbeki and Zuma are correct in their assessments, they showcase what has become a truism in the preceding three decades; relations between China and countries on the African continent are some of the most closely watched by scholars and policymakers, with many hopes pinned to them by the continent’s leaders, while many international institutions and western governments read nefarious intentions on the part of Beijing and naivete on that of the continent’s policymakers and by extension the people who populate it. Caught in between these perspectives in the mainstream debates are actual trends at bilateral levels between China and some 50-odd sovereign African states that defy generalization. For this reason the “Africa–China” “relationship” is one of the most misunderstood contemporary interactions on the globe. China has different economic tethers to different countries on the African continent, and these have evolved over time. Lack of workable incorporation of this into general thinking is one of the biggest stumbling blocks in developing coherent typologies to understand these complicated relationships. Each bilateral relationship ought to be looked at through the context of its emergence, the variables at play, and the issues at stake (including, the role of other parties). This book stems from a recognition of this. Its thrust therefore stems from seeking to understand the bilateral relationship between China and one African country, South Africa. Particularly, it seeks to delve into this relationship through the prism of theorizing about the role of competition between China and other Asian countries as a factor in China’s relationship with South Africa. Observing that Asia has been touted as the center of the coming era of international relations, particularly in terms of trade, while also noting that China ranks above all the other countries in terms of two-way trade relations with South Africa, this book comparatively examines the China–South Africa trade relationship over the first twenty-year period of relations between South Africa and China (1998–2018) through the prism of 2 AFP. 2014 (4 December). ‘Zuma: China Can Free Africa from “colonial shackles”,’ Mail and Guardian. Available at: https://mg.co.za/article/2014-12-05-zuma-china-willfree-africa-from-colonial-shackles (Last accessed: 14 December 2018).

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five other relationships post-Apartheid South Africa has with countries in the Asia–Pacific/Indo-Pacific world. Importantly, the countries—Taiwan across the eponymous straits, Japan over the East China Sea, India over the Himalayas, and the US across the Pacific and with military bases in two of China’s neighbors (Japan and South Korea) and mutual defense pacts with these and numerous other small and emerging countries in the region—all have relations with China which could be described as ranging from ambivalent at best to adversarial at worst. At the same time, China and these countries have also aimed at increased trade relations with post-Apartheid South Africa, sometimes to each other’s direct detriment in certain markets (especially machinery, vehicles, electronics, and textiles), since 1998 (when Pretoria formed diplomatic relations with Beijing to Taiwan’s exclusion). The aim of the book is to therefore determine the role that this perceived competition has had in pushing and maintaining China’s entry in South Africa’s markets and in turn opening up its own market to South African exporters and whether this continues to persist in the post-Great Recession period. Thus, the book is also interested in South Africa’s agency within the Asia–Pacific geostrategic contest. With an eye toward a more global future, I also examine the pattern in the trilateral relations among China, South Africa, and the post-Brexit European Union. The book therefore makes a contribution to the scholarship by amending the literature on South Africa’s external relations and China’s African presence by explicitly taking into account the regional motivators of China’s South Africa policy with data-based quantitative analysis. In this way, the book also directly examines—and provides somewhat conclusive answers on—the role of competition (sometimes termed the “new scramble for Africa”) in Asian states’ presence on the continent. The book begins with three central assumptions. Firstly, Asia has witnessed exponential growth in the past several decades and at the current rate of growth is bound to be the wealthiest region in the world by the end of the 2020s; a restoration to that position for the first time since the nineteenth century when its stature was diminished through colonization (with Japan as the sole exception as the country experienced regeneration and growth from middle of that century onward). Secondly, among the Asian countries, South Africa has so far had a much closer relationship with China than with all the available options, both politically, and more measurably, in economic terms. This is particularly the case on the subject of trade. There is, in other words, a differentiated engagement

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between Pretoria and Beijing. Thirdly, the Asian region is characterized by intense geostrategic rivalries that cannot be escalated into actual war or wars among them because of what is at stake and because of the entangled alliances (including the risk of nuclear warfare). The Asian states, as a result, are forced to compete in other means, and in other parts of the world. The first of these two assumptions are laid out in the following sections. The third requires a chapter of its own. The aggregate effect of these factors, at least in part, would appear to be that the countries can only give expression to their competitiveness through seeking out external markets, hence the importance placed on African trade partners (to varying degrees of success). Below I present a review of the region’s economic significance as well as an account of what appears to be South Africa’s China-centric response to it in its foreign and trade policies.

1.1

Literature: Portrait of the Global Economy’s New Center of Gravity

Prior to the industrial revolution in England and then much of Europe in the mid-eighteenth century, Asia represented some 60% of the world’s total gross domestic product (GDP). China and India alone accounted for much of this (Jacques 2009; Ndzendze 2022); with the former accounting for 29% and the latter some 22.4% of world GDP in 1600 (Kohli et al. 2011: 3).3 But, observes the former Deputy Governor of the Bank of Japan, Hiroshi Nakaso: a downward spiral followed, especially compared to the upward trajectory enjoyed by western economies and by the 1950s Asia represented only about 10% of world GDP (Nakaso 2015: 1). This was to prove a temporary retreat, however. Soon after World War II, the sustained period of recovery and expansion dubbed the Asian Miracle ensued. It was characterized by a “flying geese” pattern, with development seemingly moving from country to country (Japan, then Korea, Taiwan, and Singapore) as each matured (Nakaso 2015: 1). Starting in earnest in the 1960s with Japanese high growth, it was then followed by take-off of the “Four Tigers”: Hong Kong, Korea, Singapore, and Taiwan. Then in the 1980s Malaysia and Thailand seemed to follow suit, but were outpaced by China on the heels of the momentum

3 Kohli, Harinder S., Ashok Sharma and Anil Sood (Eds.). 2011. Asia 2050: Realizing the Asian Century (New Delhi: Sage).

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gained by its Reform and Opening Up Policy in that decade. By the end of the 1990s, China could be described as “a driving force of the Asian economy” (Kohli et al. 2011: 3).4 During this period of Asian growth, particularly in the 1980s and 1990s, there were some periods of shock and decline. The most notable and widespread of these was the 1997 Asian financial crisis which started in Thailand and resulted in higher debt, capital flight, and diminished investor confidence in several economies in the region. For some the impact was direct and for others indirect.5 Despite the unprecedented impact of the crisis, there was rapid recovery. At the root of this was a strong manufacturing base, which allowed for an export-led path to recovery and rebound (Nakaso 2015: 2). This was proven to be the case a decade later with the Great Recession (indeed China and India were examples of the few countries to not experience a recession during the entirety of the period), and in the wake of the “taper tantrum” of May 2013, triggered by the US Fed when it announced that it would taper its quantitative easing policy by tapering the pace of its purchase of Treasury bonds,6 “the stability of financial markets in emerging economies in general was eroded, but Asian stock and foreign exchange markets remained relatively immune” (Nakaso 2015: 2). The Asian economies’ share of global GDP has rebounded its share to some 30% could be projected to maintain its “contributing to the sustainable growth of the global economy” (Kohli et al. 2011: 3; Romei and Reed 2019). Asia’s economic growth and resilience is broadly explained by two related factors: its place and role as the manufacturing hub of the world from the 1980s onward and, secondly, intra-regional trade has been remarkable and growing (more than half of the Asia–Pacific’s total

4 Romei, Valentina and John Reed. 2019 (March 26). ‘The Asian Century Is Set to Begin,’ Financial Times. Available at: https://www.ft.com/content/520cb6f6-295811e9-a5ab-ff8ef2b976c7 (Last accessed: 17 November 2019). 5 See Moreno, Ramon. 1998 (August 7). ‘What Caused East Asia’s Financial Crisis?,’ Federal Reserve Bank of San Francisco Economic Letter. Available at: https://www.frbsf.org/economic-research/publications/economic-letter/1998/ august/what-caused-east-asia-financial-crisis/ (Last accessed: 4 November 2019). 6 The main source of anxiety at the root of the “taper tantrum” were fears of a market meltdown due to the end of quantitative easing which had been the main strategy for US economic recovery following the Great Recession. But this proved not to be the case; thus the effects were short-lived in the US. See Neely, Christopher J. 2014 (January 28). ‘Lessons from the Taper Tantrum,’ Federal Reserve Bank of St. Louis.

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trade being intra-regional United Nations 2015; Kohli et al. 2011: 3),7 further buttressed by progressive elimination of tariffs and inflows from foreign direct investment (FDI). Non-Asian firms established subsidiaries in the region due to the efficiency (including low-wage labor) and the economies of scale it offered. Both of these hinge on the region’s high population and human capacity owing to investments in education. These have seen Asia become a central point in the global value chain as many western MNCs moved operations to Asia, and subsequently trading finished products with their home countries and the rest of the global market. Thus the region, in its capacity as a hub of these trade networks, has come to enjoy job creation prospects due to the presence of foreign firms and growing exports (Romei and Reed 2019; Nakaso 2015: 3). This also contributes to the stability seen throughout the region. In a virtuous cycle, this has in turn encouraged further FDI. In the 1990s and onward there was a growing weariness within the region that an over-dependence was being developed toward extra-regional capital which would render the region particularly vulnerable to economic downturns and shocks in those other regions (Nakaso 2015: 10; Kohli et al. 2011: 3). This has not come to be, however, as FDI to the region has only continued to grow over time. By 2018, the region absorbed some 39% of global FDI. This was an improvement from a share of 33% in the previous year. Even amid COVID-19, in 2020, the region’s FDI (totalling $535 billion) received a 4% improvement on the previous year (UNCTAD 2021).8 This means the region received 50% of global FDI flows in 2020. On the other hand, South Africa’s FDI inflows declined by 39% in the same year (Toyana 2021). This is perhaps an indication of the divergent paths to recovery likely to shape the futures of the two regions as the world takes

7 United Nations Economic and Social Commission for Asia and the Pacific. 2015. Asia–Pacific Trade And Investment Report 2015. United Nations Economic and Social Commission for Asia and the Pacific. Available at: https://www.unescap.org/sites/def ault/files/Asia-Pacific%20Trade%20Brief.pdf (Last accessed: 3 November 2019). China, which has been a major player as the assembly and export center for global supply chains, has been flagging a change to this status quo. As a consequence, “the growth in exports to China from other Asian economies has been depressed as China, by increasingly using domestically produced parts, has become less dependent on imports” (Nakaso 2015: 5). 8 UNCTAD. 2021. ‘Investment Flows to Developing Asia Defy COVID-19, Grow by 4%,’ UNCTAD. URL: https://unctad.org/news/investment-flows-developing-asia-defycovid-19-grow-4.

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on what economists have termed a “K-shaped” post-COVID trajectory (Bheemaiah et al. 2020). The region itself is a major external investor, having sent out US$389billion in outward FDI (OFDI) in 2020 (a 7% increase from 2019). This highlights another mechanism that Nakaso identifies behind Asia’s strong economic maturity and relative autonomy; growing domestic demand (Nakaso 2015: 3). With exports growing, workforce shifted from being primarily agricultural and joined factories. With growing wages, the population has come to consist of middle-income consumers. The question at hand, and one central to the present book’s thesis, is whether Asia will be able to keep up its position as the global growth center as well as consolidate its position as the world’s center of trade. In this regard there is consensus that Asia will maintain its comparatively high growth rates, and therefore its share of the world’s GDP. A threat, however, remains in the form of a middle-income trap. This is particularly true in the case of China. China’s Demographic Challenge China, the country with the world’s second-largest GDP, is seeing its annual population growth rate (0.4% in 2019) bested by such war-torn or impoverished countries as Afghanistan (2.3% in 2019), the Democratic Republic of the Congo (3.2% in 2019), Iraq (2.3% in 2019), and South Sudan (0.8% in 2019). How such a state of affairs arose appears to puzzle. But in some ways, the puzzle becomes less complicated when we consider that the same efficient governance which brought about the transformative Reform and Opening Up policies which catapulted China into the economic position it currently occupies is also the same regime which efficiently put in place the measures which curtailed the population growth in the country. But this is only part of the complete picture. To grasp the full story of the current situation in China, which is likely to see the country climax at 1.44-billion people (most of them old, and the young disproportionally male) in 2025 and then subsequently decline. It is necessary to revisit the history of China’s demographic challenge. For 27 years, China was under the rule of Mao Zedong. He headed the Chinese Communist Party between 1949 and 1976 in every sphere— political, economic, social, and cultural. In these years, China’s population growth soared; growing from 540 million people in 1949 to 940-million by 1976. Mao’s role in this has been a subject of debate, but the

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country’s official propaganda encouraged big families and incentivized, both symbolically and materially, increased child-bearing. The world was changing however, and so was opinion around demographics—China was not immune from such opinion shifts. To begin with, the years between the late 1960s and early 70s saw policymakers the world over seized by a book which made dire predictions about the relationship between population growth and economic prosperity in a country. The book, titled The Population Bomb (1968), written by American biologist Paul Erlich, proved immensely influential in policymaking circles. In post-Mao China, the book served as something of a confirmation bias. Some within the ruling circles had already bought into what it was arguing. The role of Song Jian, a politically connected scientist, is debated, but he had been arguing, partially on the basis of such works as The Population Bomb, for a cap on the growth in the Chinese population and is regarded as the architect of the policy (Greenhalgh 2005: 253). By his own estimate, the country would be best suited economically in a situation where it had around 700 million citizens at most. With or without his prodding, the country introduced the One-Child Policy in 1979. On the surface, the policy worked too well. The country’s population growth declined considerably in the subsequent years, with many families adhering to the strict enforcement of the policy; among them hefty fines, sterilization, and forced abortions. Rudong for example, in Jiangsu Province, was among the star performers in terms of enforcing and abiding by the policy, and it is among the most aged in terms of population, with the majority of its citizens being over 60 years of age. Further, the country also has a problem in terms of its gender ratio. Since 1994, the country has seen on average 115 male births for every 100 female births. In some provinces, this reaches as high as 130 male births for every 100 female births. By government estimates, some 30-million men will be life-long bachelors. The “Japanese Scenario”: What Worries China For about forty years, China’s economy was largely reliant on an abundant supply of working age, low-cost labor. The population dynamics tell us that that will not be a lever that China has for much longer. In addition to this, Chinese labor wages have been increasing (the hourly wage of US$3.60 is on par with Portugal and is higher than India’s by a factor of five [Yan 2017]). Growing life expectancy from 69.3 years in the 1990s to 75.7 years as of recent, and even higher in some provinces also

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means that there is now a larger population of aged individuals reliant on the government. The consequence of this is greater demand on the government coffers to provide care for the aged (65+ years old), who are currently at 240-million people, and finding increasingly little care among their limited family networks. Where it used to be the norm to have three or even four generations under one roof, now just 38% of people over the age of 60 years old live with their grown children; the pressure on those children is even more intense, with what is called the “4-2-1 problem”; one individual supporting four grandparents and two parents all by themselves. China is also confronted by a scarcity of hospices, expensive medical care, and a diminishing sense of community. These senior citizens have resorted to forging their own hospices and elderly homes. As one elderly manager of a Buddhist sanctuary for the aged in Fujian province put it, “the 80-year-olds help the 100-year-olds.”9 China is not alone in the demographic challenge it faces. In fact, they only have to look across the East China Sea to Japan to see another peer country which has seen rapid economic growth, followed by decades of demographic decline. In 2017, Japan recorded around 946,000 new births. This was the lowest annual record since Japan began capturing this information, in 1899. This was a −0.2% population growth (followed by a steeper decline in 2020, at −0.3%). Further, in Japan, more than half the population is over 46 years of age, which has led, for example, to the average age of a construction worker being around 48 years (compared to 41 years in the US). Japan, like China recently, introduced measures and incentives to encourage couples to voluntarily have more children. This was begun in the mid-1990s. Clearly, it did not work out as planned. A number of issues are blameable for this, but among the most obvious is the continued decline of steady, permanent work in Japan since the 1990s, due to companies hiring people on a freelance basis; this, coupled with the aftershocks of globalization and the 2008/2009 Great Recession, only exacerbate the issue. The lack of permanent work greatly matters in a country where 70% of women tend to resign from their jobs after their first child, rendering the man the exclusive breadwinner. China has the same problem, but one which is worsened by some facts which are unique to its context. To begin with, China’s elderly population eclipses 9 Hatton, Celia. 2015 (December 21). ‘Who Will Take Care of China’s Elderly People?,’ BBC. Available at: https://www.bbc.com/news/magazine-35155548 (Last accessed: 17 November 2019).

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Japan’s entire population. Secondly, China is increasingly expensive to live in, especially in urban areas, where the population is increasingly concentrated. China has also changed in its values toward families, and the government’s chances of affecting a spike in its population are very slim. Further, compared to Japan, China, though with a higher nominal GDP ($14.72 trillion) overall, has a substantially lower GDP per capita at around $10,500 to Japan’s $40,086 in 2020. In terms of GDP per capita, China’s standards of living are closer to Mexico’s than the US and its developed East Asian neighbors at this point. Moreover, its population challenges are catching up to it sooner than other major rapid developers. A declining working population, increasingly giving birth to fewer children is set to curtail China’s economic trajectory. The Problem with the Two-Child Policy To counter the apparent decline in its population, in 2014 the government officially announced the Two-Child Policy (and if speculation on the social network Weibo is to be believed, a Three-Child Policy may soon follow) with the condition that the second child should be born at least 4 years after the first, and only to women above the age of 28. The response has so far been less than lukewarm, with very few applying for the second child, and even fewer expressing intent to have another child despite the four-year gap. The reasons have to do with the apparent sway of the smaller family, as well as rising costs of raising children in modern China. Further, young men are also expected to have at least a car and an apartment before getting married, in a notoriously expensive real estate market. This places a toll on parents, many of whom participate in resource-pooling for the would-be husband and father. Because of this, China has a savings-to-GDP ratio of between 45 and 50%. Additional incentives by some local authorities include tax breaks, education, and housing subsidies. Apparently, this is still not enough. China’s demographic challenges can be expected to continue, with little that the government can do to reverse them. But, how much of them were the government’s making in the first place? To begin with, China’s population growth was beginning to stall ahead of the introduction of the One-Child Policy; in 1970, there were 5.8 births per woman; by 1978, the number was closer to 2.7. Above all, the One-Child Policy was not impenetrable. In all, there were 22 ways in which parents could make

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the case for a second child, including (1) if both parents were only children, (2) if the breadwinner was incapacitated, and, controversially, (3) if the first born was a daughter. Ethnic minorities were also exempt from the policy. Indeed, by 2007, it is estimated that only 36% of the population was strictly subjectable to the policy. It would appear, then, that the One-Child Policy is not the only cause of the present-day challenge. The economic situations of families as they see it themselves along with changing social norms are also to be taken into account. Here Japan perhaps offers lessons. Principally, we can derive from the Japanese case that “demographic onus depresses economic growth through both the supply-side and demand-side factors” (Nakaso 2015: 7). In terms of the supply-side, there is recognition that labor constraints exert downward pressure on growth rates. For example, in the 2000s Japan’s shrinking labor force has been on the decline, leading to declining savings rates and capital accumulation, while demanding more from the fiscus (Nakaso 2015: 7). But China appears to have reinforcements in place. In particular, I note three. The first has been a focus on automation, concomitant with a focus on high-quality production by highly skilled labor. In line with the muchanticipated fourth industrial revolution (4IR), China is expected to be a leader in smart factories through 3D printing (additive manufacturing), the industrial internet of things (powered by 5G, in which the country is a prime mover) and other implements of this revolution in production. China’s pursuit of this, under the name “Made in China 2025,”10 is “a central part of China’s strategy to transition from a country known for making toys and t-shirts to one that leads in advanced technologies” (Crawford 2019; May 7). Because of the scale of its ambition, it has

10 Under MIC 2025, 9 sectors have been pegged as “priority areas” (PRC Government, 2015; May 19). These are “improving manufacturing innovation, integrating technology and industry, strengthening the industrial base, fostering Chinese brands, enforcing green manufacturing, promoting breakthroughs in ten key sectors, advancing restructuring of the manufacturing sector, promoting service-oriented manufacturing and manufacturingrelated service industries, and internationalizing manufacturing” (PRC Government, 2015; May 19). See: PRC Government. 2015 (May 19). ‘‘‘Made in China 2025” Plan Issued,’ Available at: http://english.www.gov.cn/policies/latest_releases/2015/05/19/content_2 81475110703534.htm (Last accessed: 4 November 2019).

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raised anxieties in Washington11 and has been less emphasized by the Chinese government since 2018.12 The second has been active recruitment of foreign workers from the Southeast Asian region, as well as from distal parts of the world. This will also increase regional integration as China will be a fulcrum point for many people in Asia seeking greener pastures. The establishment of over 530 Confucius Institutes, whose primary task is Mandarin teaching and the active promotion of Chinese culture and understanding between China and host countries’ cultures,13 all over the world since 2004 makes this task comparatively easier to accomplish. Indeed, an estimated 100-million people had already been learning Chinese with these institutes by 2010. By 2019, there were some 900,000 foreign workers in China, with 23.7% of these in the increasingly cosmopolitan city of Shanghai.14 The third reason, related to 11 “The plan has become a political flashpoint in the Trump administration’s trade war with China…Vice President Mike Pence invoked the country’s ire when he lambasted Made in China 2025 — its sweeping industrial planning strategy—as a directive to obtain American intellectual property” (Crawford 2019; May 7). See Crawford, Emily. 2019 (May 7). ‘Made in China 2025: The Industrial Plan that China Doesn’t Want Anyone Talking About,’ PBS. Available at: https://www.pbs.org/wgbh/frontline/article/made-in-china-2025-the-industrial-planthat-china-doesnt-want-anyone-talking-about/ (Last accessed: 4 November 2019). 12 “Within weeks of Trump’s first tariff announcement in June 2018, the Chinese government started to downplay MIC 2025 and has avoided mentioning the plan since (which Trump held up as evidence that, thanks to him, China had abandoned the plan). Chinese media has been barred from reporting on it. And in March of this year [2019], [Prime Minister] Keqiang did not mention MIC 2025 in his annual government work report for the first time since its announcement” (Crawford, 2019; May 7). Nevertheless, “spoken or otherwise, there seems to be consensus that the principles behind MIC 2025 are alive and well — China just isn’t using that name anymore” (Crawford 2019; May 7). 13 Jakhar, Pratik. 2019 (September 7). ‘Confucius Institutes: The Growth of China’s Controversial Cultural Branch,’ BBC. Available at: https://www.bbc.com/news/worldasia-china-49511231 (Last accessed: 4 November 2019). 14 “As of the end of 2018, there were 215,000 foreigners living in the city with work visas, with about 18,000 of them considered to be high-level talents, the most across the country” (Xing, 2019; January 16). See: Yi, Xing. 2019 (January 16). ‘Shanghai Home to Largest Foreign Worker Population in China,’ China Daily. Available at: http://www.chinadaily.com.cn/a/201901/16/WS5c3ed0a9a3106c65c34e4d2a. html (Last accessed: 4 November 2019). See also: International Labour Organization. 2017. Attracting Skilled International Migrants to China: A Review and Comparison of Policies and Practices (Geneva: Centre for China and Globalization). Available at: https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/---ilobeijing/documents/publication/wcms_565474.pdf (Last accessed: 4 November 2019).

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both of the two preceding ones, is the much longer term Belt and Road Initiative, which will, if successful, see China expand its investment base, and regional and global integration. This can be leveraged to facilitate access to human capacity and strategic investments by China. The Global Implications of Asia’s Rise

Total FDI stock (in billions of US$)

Figure 1.2 provides a snapshot of the region’s share of world trade between 2001 and 2016. A discernible change over the same timeframe is the growth in Asia’s share of FDI as shown in Fig. 1.1 Over the same timeframe, South Africa’s trade with Asia grew substantially in the 2001– 2008 period. Imports from Asia for example grew continuously until 2008 when they dipped, and again from 2010 to 2018, with an interruption in 2016 (when most of world trade had dipped more generally) and rebound again. South Africa’s exports to the region have observed a similarly impressive pattern of growth, with similar interruptions in 2009 as well as 2011–2016 before recovering in 2017. These nevertheless still amounted to a 396.53% growth over the entire timeframe. 600 500 400 300 200 100 0 Asia

Africa

Europe

Latin America and Carribean

North America

Years 2017

2018

Fig. 1.1 Regional shares in global FDI (Source UNCTAD, FDI/MNE database. Available at: www.unctad.org/fdistatistics/, last accessed: 17 November 2019)

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Share of world trade (in %)

35

32.3

30 25.5

26.2

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27.4

27.8

28.1

28.1

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25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Years

Movement in total annual imports (in billions of US$)

Fig. 1.2 Asia’s share of world trade, 2001–2016 (Source Author) 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fig. 1.3 Total South African imports from Asia, 2001–2018 (Source Author)

This macroeconomic view, however, may in fact conceal the dynamics between South Africa and one Asian country in particular. We turn to Pretoria’s foreign and trade policy shifts since the transition to democracy in the 1990s, and China’s place in it.

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Movement in total annual exports (in billions of US$)

40 35 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Fig. 1.4 Total South African exports to Asia, 2001–2018 (Source Author)

Beijing Over Others: The Pre-Eminence of China in South African Foreign and Trade Policies Among the Asian states at the forefront in gaining a footing on the African continent and deepening relations with its independent states—indeed peerlessly leading them by many indicators—has been China. In 2017, South African exports to China represented a 9.5% share of its total. In second and third place were the US and Germany at 7.7 and 7.1%, respectively. The other Asian countries in South Africa’s top export destination list is Japan, ranking at fourth place, representing 4.7% of South Africa’s exports, followed by India at 4.6%. In terms of imports on the other hand, China took up an 18.3% share (i.e., twice its imports from South Africa), followed by Germany at 11.9%, the US at 6.6%, Saudi Arabia at 4.7%, and India at 4.7%. The Chinese figure, while only a sizeable but not majority share and not an outright majority of 50% or more, is nonetheless telling when compared against the fact that in 1998, when the two countries began their diplomatic relations, China’s share stood only at 3.1%, and Japan’s at 8.2%. Even accounting for Hong Kong, China’s total share

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was still at 4.1%.15 This has been the result of shifts in South Africa’s foreign policy and trade orientation, along with regional competitionmotived and domestically driven acceleration of Chinese trade with the African continent. This is looked at in the following section. Post-1994 South Africa’s Foreign and Trade Policies The levels of tariffs16 in high-income developed countries have seen a substantial reduction since 1945. Currently, these average at about 4% (even with the Trump-era trade war, US tariffs still averaged around 2%).17 Among developing countries, they average at 20%, though also on a clear downward trend. As of 2017, sub-Saharan Africa’s rate is around 5.67% and on a downward direction since the emergence of the African Continental Free Trade Agreement (AfCFTA). Indeed, regional trade agreements (RTAs), with more than 75 established since 1948 according to the WTO, are among the key factors behind the decline in tariffs. International organizations such as the World Trade Organization18 have played a substantial role in this regard. The WTO is often described as an international trade regulator. However, this description can be misleading. The organization itself does not initiate trade rules; these are generated and agreed upon by national governments (including South Africa) who are its members. In this sense, the organization conducts periodic trade policy reviews to assess the extent to which—or whether at all—member countries have fulfilled the agreements they acceded to in rounds of negotiations. The most recent set of multiparty tariff negotiation was the

15 MIT Observatory of Economic Complexity. 2019. ‘Where Does South Africa

Import From? (1998),’ MIT Observatory of Economic Complexity. Available at: https:// oec.world/en/visualize/tree_map/sitc/import/zaf/show/all/1998/ (Last accessed: 7 November 2019). 16 There are two types of tariffs: specific (fixed for all products in a similar class) and ad valorem (based on the value of the goods being imported). 17 In 2019, South Africa’s rate is around 4.32%, having consistently come down since 1993, when it was around 13.4%. 18 According to its website, the WTO is “the only international organization dealing with the global rules of trade. Its main function is to ensure that trade flows as smoothly, predictably and freely as possible.” URL: https://www.wto.org/english/thewto_e/ whatis_e/inbrief_e/inbr_e.htm#:~:text=In%20brief%2C%20the%20World%20Trade,predic tably%20and%20freely%20as%20possible (Accessed: 11 January 2021).

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Uruguay Round (which also created the WTO itself),19 held from 1986 to 1993, after which the member countries were meant to implement the agreements through their national legislatures. Another important function of the WTO is the resolution of disputes. These are managed by the Dispute Settlement Body (DSB), which operates as a committee (with one member from every WTO member country) meeting regularly to discuss issues that states have toward one another’s trade policies. These have to be restrained to prior agreements made within the WTO. These disputes can include instances wherein countries, purposely or otherwise, do not implement WTO commitments. A trading partner may express its belief that a country has not implemented these agreements, or that a newly introduced legislation or policy in another country is in contradiction to its WTO commitments. (Indeed, frequently domestic actors within a government’s own country may protest new legislation on the grounds that it violates WTO agreements.) Three additional explanations for the increase in world trade according to the Bank of England’s Quarterly Bulletin include the falling costs of trade, growth in the production of tradable goods, and a steady rise in incomes.20 The first is caused by the steady decline in the costs of transportation, communications, currency exchange mechanisms, and tariffs in the past several decades. Financial globalization and the digital revolution have been instrumental in lowering the costs of doing business. The second factor is linked to the increase in productivity has coincided with growth in more tradable goods. The final factor alludes to the fact that the increase in incomes in the developing world have caused their spending to move away from basic goods such as food and clothing and to expand into manufactures (electronics and vehicles, for example). This has given rise to product differentiation, variety, and international trade. In 2019, the total amount of goods traded internationally was US$19 trillion, significantly up by about US$13 trillion since 2000 when they

19 The 1947-signed General Agreement on Tariffs and Trade (GATT) had been the main framework but not a standing body. After the creation of the WTO, GATT was incorporated into it and remains the basic standard for WTO members and countries that wish to gain entry into it. 20 See the study here: Dean, Mark and Sebastia-Barriel, Maria. 2004. “Why Has World Trade Grown Faster Than World Output?,” URL: http://www.columbia.edu/~md3405/ Other_Paper_1.pdf (Accessed: 11 January 2021).

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amounted to US$6.45 trillion.21 To be sure, there have been setbacks. For example, following recovery from the crisis of 2008, trade grew at a sluggish rate and then decreased by 12% in 2015 and 3% in 2016 (the first such two-year consecutive decline in global trade since the early 1980s).22 Earlier in the chapter we spoke of the need for trade for price competitiveness. Some scholars, however, have questioned the value of trade for economic development. Indeed, the connection between trade and growth is not always direct. For example, between 1980 and the early 2000s, world trade outgrew world production by a ratio of almost 3:1.23 Though this varies by region and by country, it still indicates that the liberalization of trade has led to growth for some and not all countries. The three leading countries in terms of exports in 2019 were China ($2.4 trillion or 13.3% of global exports), the US (with US$1.6 trillion US or 8.8% of global exports), and Germany (US$1.4 trillion or 7.9% of global exports). Yet, the trade decline seen in 2015 and 2016 was geographically spread out and hit developing countries harder than their developed counterparts.24 A 2000 study published by the African Development Bank states that while there are short- and long-term gains to be made by countries from trade, these are not necessarily evenly distributed. This is because many countries in the developing world are held back by their shortage of foreign currency, which in turn limits growth.25 An increase in a country’s exports provides foreign currency, which in turn can be used in other facets of the economy, including in investment, consumption, and government expenditure. All of these have some

21 A.P. Thirlwall, ‘Trade, Trade Liberalisation and Economic Growth: Theory and Evidence,’ African Development Bank, p. 5. 22 Office of the United Nations Secretary-General. 2018 (17 August). ‘International Trade and Development,’ United Nations. 23 While world output (or GDP) has expanded fivefold, the volume of world trade has grown 16 times at an average compound rate of just over 7 percent per annum. See A.P. Thirlwall, ‘Trade, Trade Liberalisation and Economic Growth: Theory and Evidence,’ African Development Bank, p. 5. 24 Office of the United Nations Secretary-General. 2018 (17 August). ‘International Trade and Development,’ United Nations, p. 3. 25 A.P. Thirlwall, ‘Trade, Trade Liberalisation and Economic Growth: Theory and Evidence,’ African Development Bank, p. 7.

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components of importation, and thus less pressure is exerted on a country’s economy if it possesses foreign reserves (i.e., a favorable balance of payments position).26 There are several structures and attendant interests in South Africa’s trade policy. These are overseen primarily by the country’s Department of Trade, Industry, and Competition (recently renamed from the Department of Trade and Industry). The department of trade’s work is enhanced by trade agreements reached with other countries through efforts by the presidency and DIRCO. In turn, the country’s development strategy (the National Development Plan [NDP]) is geared around enhancing value-added exports, in addition to agriculture. As detailed in Van der Westhuizen and Smith (2015) below, South Africa’s foreign policy is in turn driven by economic considerations, particularly reversing its worsening unemployment figures which are some of the highest in the world (Mzungulu and Ndzendze 2021). This means that trade policy is ideally built around generating jobs through labor-intensive, but also advanced manufactures. South Africa’s foreign policy, much like (and indeed because of) the domestic order of the country took a divergence in 1994, with the coming into power of the country’s first black government under the leadership of Nelson Mandela. Thus each South African president has brought an evolution in the country’s foreign policy (Qobo and Dube 2015: 145). Furthermore, and more to the point of this book, scholars of South African foreign policy observe that the country’s transition to democracy has been followed by a shift in foreign policy inclinations from one defined by normativism and Western leanings to a more pragmatic approach that has seen it align with the rising powers of the East (Qobo and Dube 2015: 145). What has remained constant over this near threedecade period is South Africa’s self-understanding as a regional leader, and middle power. Within the continent South Africa has had ample opportunities to live up to middle power and regional leadership status: “typical middle power activities include a consistent interest in the resolution of conflicts (more often in their immediate region, but also on occasion beyond), and strengthening international law and the multilateral system (because they do not have preponderant military power)” (Qobo and Dube 2015: 145). Nevertheless, the middle power ranking, though often 26 A.P. Thirlwall, ‘Trade, Trade Liberalisation and Economic Growth: Theory and Evidence,’ African Development Bank, p. 7.

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caricatured as the diplomatic equivalent of a global “boy scout,” has not precluded pragmatism given that “the middle power role is also driven by considerable self interest” (Van der Westhuizen and Smith 2015: 344). It is because of this that some foreign policy watchers note that South Africa’s foreign policy changed and took a dramatic turn toward the East with the departure of President Mbeki in 2008 (Qobo and Dube 2015: 151). It is in light of this that the country’s trade policy also followed up on earlier commitments to diversifying ties and substantially minimizing the proportion of the US and the EU in what officials termed “the Butterfly Strategy” (Qobo and Dube 2015: 151).27 Under President Zuma, foreign policy was aligned more and more toward China and Russia, with the two countries being granted greater bilateral attention, “especially in diplomatic and commercial relations” (Qobo and Dube 2015: 151).28 In this regard it is noted that Russia was a high priority, receiving more visits by the South African president than any other country. Furthermore, the ruling ANC “has cemented partyto-party relations with both Vladimir Putin’s United Russia, despite its right-leaning credentials, and the Communist Party of China” (Qobo and Dube 2015: 151). Such associations have been received differently, and accusations of corruption have flared up.29 Nonetheless, the decisive tilt 27 They offer the following example: “the Department of Trade and Industry does not have fully fledged units that are sufficiently staffed to pursue commercial diplomacy in these new priority economies, that is, Brazil, Russia, India, and China and a host of other emerging economies. It also lacks a dedicated research capacity to inform South Africa’s strategies on engaging with the new economic players” (Qobo and Dube 2015: 151). 28 It is a commonly held historiography that “In the period beginning around 2002, especially midway through President Thabo Mbeki’s first term of office, South Africa placed a strong emphasis on Africa’s renewal or renaissance,” whereas under Mandela there was a “moralising discourse on human rights that was characteristic of President Nelson Mandela’s era (1994–1999)” (Qobo and Dube 2015: 151), whereas the Zuma presidency in turn was characterized by the tilt toward the East. Nonetheless, as the remainder of the section develops and as the remainder of the chapters in this book show, this neat compartmentalization is not without its flaws. Indeed, the eastward tilt had already begun in the 1990s. See Van der Westhuizen and Smith (2015: 344). 29 “News of SA’s nuclear deal with Russia has raised the spectre of another arms deal in the making, with concerns over the tender process and funding for the multibilliondollar project.” See Legal Brief . 2018 (November). ‘Concerns over SA’s nuclear road ahead,’ Legal Brief . Available at: https://legalbrief.co.za/diary/legalbrief-forensic/story/ concerns-over-sas-nuclear-road-ahead/pdf/ (Last accessed: 3 November 2019). Writes another national publication, paraphrasing the former president’s remarks in an interview one year after stepping down: “He has claimed that the agreement – despite its

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in South Africa’s policy is noted by all. Where there is no universal agreement, however, is on Qobo and Dube’s posited date of 2008 as being the starting point of this shift. Indeed, other scholars note data indicating this eastward turn even before 1994. To be sure, the decision to move away from Taiwan and instead recognize the People’s Republic of China—an act that is accurately seen as an acknowledgment by the Mandela government of the growing significance of the mainland—preceded the 2008 date by at least a decade.30 Holden and Isemonger’s (1999) pioneering work—stemming from an interest in examining the country’s trade links with the emerging “non-traditional” trading partners, and particularly those of the Indian Ocean Rim (IOR)—indicates that over the 1992– 95 period trade with IOR economies was largely composed of mutual exchanges in natural resources and was outpacing South Africa’s trade with other partners: (Holden and Isemonger 1999: 89). Furthermore, there were some interesting characteristics: [South Africa’s] imports and exports are positively related to the gross domestic product of our trading partners, and negatively related to their population size and distance from South Africa. Also, more open economies have absorbed more exports from South Africa. (Holden and Isemonger 1999: 89)

This fact has been embraced by a large section of the foreign policy community, with Qobo and Dube noting that the trade with the east is driven by an interest in “shaping the development agenda with likeminded countries” (Qobo and Dube 2015: 145). Others differ when looking at South Africa’s trade with China, find it to be lopsided. Mutambara’s work suggests that: South Africa continues to benefit more from trade with its long standing trading partners than it does with China. Trade with China merely provides South Africa a market mainly for non-fuel primary commodities, while the traditional trading partners provide markets for both low value and

monstrous cost – would have helped prevent the mass schedules of load shedding we have seen in the last week” (Head 2019; March 22). See Head, Tom. 2019 (March 22). ‘“I’m not corrupt: it’s just propaganda” – Jacob Zuma goes nuclear on his critics,’ The South African. Available at: https://www.thesouthafrican.com/news/jacob-zuma-news-nucleardeal-russia-corrupt/ (Last accessed: 3 November 2019). 30 This took place on the first of January in 1998.

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high value added products and opportunities for intra-industry trade. This is essential for innovation and technology spillovers both of which are essential to help South Africa to develop its manufacturing base further. (Mutambara 2017: 97; emphasis in the original)

This is a widely held view, expressed in various platforms by South Africans, and Africans in general. From the perspective of the broader population, however, there is a recognition of China’s significance. Van der Westhuizen and Smith (2015) conducted a survey-based study that sought to gain an understanding of “average” South Africans’ view on a litany of foreign policy-related issues, including its economic relations with the outside world. In the study, they found that South Africans not only envision, among others, a stronger role for their country in the African continent, but also that they “strongly endorse the view that the fundamental purpose of our foreign policy should be to reduce unemployment and generate economic growth” (Van der Westhuizen and Smith 2015: 344). Thus: The strategic value placed on China as a key trading partner and potential ally, the significance of the Southern African region to the country’s development, the prioritisation of trade over human rights as well as the key role of business as a social actor underscore the extent to which our international role should ultimately serve the country’s developmental interests. (Van der Westhuizen and Smith 2015: 344)31

Another important finding, and one which underscores the preceding point, is the degree to which “South Africans’ foreign policy postures seem to broadly converge, despite the country’s historic demographic divisions” (Van der Westhuizen and Smith 2015: 344). Or, to put it

31 It should be noted, however, that Van Westhuizen and Smith’s survey did not directly ask its respondents about their feelings toward China. In a August 2017 published survey by Pew, it was indicated that “only 45 percent of South Africans had a favorable opinion of China’s role in the world. This level of support for Chinese foreign policy lagged behind all other African countries represented in the survey, and was lower than the 53 percent of South Africans who viewed the United States as a constructive force in international affairs” (Ramani, 2018; August 31). See Ramani, Samuel. 2018 (August 31). ‘Can China Burnish Its Image in South Africa?,’ The Diplomat. Available at: https://thediplomat. com/2018/08/can-china-burnish-its-image-in-south-africa/ (Last accessed: 2 November 2019).

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differently, South Africans, across racial, age, religious, wealth, educational level, or geographical location, seem to agree on these points (Van der Westhuizen and Smith 2015: 344). Furthermore, a broad consensus suggests that the solution to the lop-sidedness of the trade, and the attendant restructuring of the contents being traded (i.e., a higher proportion of employment-creating manufactured goods over raw resources), should come from within Africa. The South Africa–China relationship has evolved over time. Upon reciprocating visits by their respective leaders in the late 1990s, initiatives were then made “to develop bilateral relations, deepen strategic partnerships, and signing a number of economic cooperation agreements” (Mutambara 2017: 97). Furthermore, Pretoria recognized China’s market economy status in 2004. Thereafter, talks followed regarding a free trade agreement on behalf of the Southern African Customs Union (SACU). This is yet to materialize as of 2021. In the year 2006, however, they did sign a partnership cooperation framework to liberalize trade between them, and ease investment flows (Mutambara 2017: 97). Over the years the two countries have engaged with such rapidity that the net effect has been China’s emergence as South Africa’s largest trading partner, and South Africa being China’s leading trading partner on the continent. This has not been in a vacuum. In recent years, and especially in the past decade, scholars have noted a global shift in the global commercial centers of gravity, from a historically western dominated order to an increasingly Asia-dominated one, or one which will at least be increasingly shaped by developments in that region. Importantly, while some countries have already seen this influence materialize, others have experienced a marked stagnation or decline in global reach. In this ebb and flow of influence, there has been inevitable interaction of interests resulting in competitive postures. Africa has been a claimed site of such competition by academics, journalists, and avowedly so by some policymakers and those who advise them. The question posed by Alexandroff (2015: 249) is prescient and expresses a broader sentiment among South African scholars: “How does South Africa navigate in an increasingly turbulent and possibly fragmented world order?” (Alexandroff 2015: 249). Such an answer has to factor in China, the country earmarked by many to be the next global hegemon. But what form that hegemony is going to take and what implications it is going to carry cannot be accurately accounted for at this point. Nominally studied in isolation or secondarily, it is worth examining the two related themes of, on one

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hand, bilateral economic relationship between South Africa and China, within the second theme of the context of regional competition and cooperation between China and the other states in its Asian neighborhood. This book looks at those between China and Taiwan in the Straits, China and Japan in the northeast, China and India in the south and the South China Sea, the US in the South China Sea and the broader Asia–Pacific (or “Indo-Pacific” world) through which it reputedly influences the preceding states in its posture against China, and the rest of the small but increasingly powerful states in the ASEAN framework (see Chapter 2). The US, though not an Asian state, has had a strong presence in the Asia–Pacific, as a military ally to Japan and Taiwan (as well as South Korea). Increasingly, the US has also sought to forge a “democratic” alliance against China by including India (hence “Indo-Pacific”) in its security and geostrategic calculus toward the region. Consideration is also given to the triangular relationship between South Africa, China and the European Union. While, rightly, this may not be considered an Asian regional entity, it nonetheless presents opportunity to peek into how Chinese and EU interests are interacting in South Africa amid mutual desires to reach out more into each other’s regions (China has been gaining a foothold into the Mediterranean and Iberian peninsula, for example). This chapter thus makes for a more complete review. This is bound to grow in significance, at least in the next decade, as the EU announced the launch of what is seen as its own version of the Belt and Road, namely the Global Gateway in early December 2021. The supranational entity also announced that it had earmarked some e300 billion for this initiative (Europa [EU press release] 2021). South Africa and the Emerging World To be sure, South Africa has had relations with other collections of emerging states, most notably and consciously the BRICS. Here China dominates as well. Paying attention to the role of the private sector is an important metric not only for the purposes of measuring the BRICS in economic terms (as was originally envisioned by Goldman Sachs economist Jim O’Neill as well as South African, Brazilian, and Indian officials in the now-defunct IBSA formation), but also a measurement of the extent to which the relationship has taken (is or still taking) on a life of its own, and outgrowing the relatively top-down political nudging, which can sometimes feel like an arranged marriage. In other words, in assessing the stock market dimension we are able to gauge how

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much the fellow BRICS multinational companies are optimistic about the economic future of South Africa—in line with, or in contradiction, to the rhetoric expressed by the various governments, whose political task it is to exclusively express optimism. Underlying the stock market is a transparent spontaneity and self-interest that acts only in line with the dictates of rationality (utility maximization) and outside the (particularly Chinese) risk-friendly government revenue-derived state-to-state concessional lending and foreign investment. The stock market can therefore be taken to be a proxy for mutual confidence, or in the very least confidence in South Africa, among the other BRICs, and particularly their private enterprises. In fact, the spontaneous and de-centralized nature of stock market investment can be taken as a surer reflection of the actual confidence levels placed by the BRIC countries in SA than the proposed BRICS rating agency, which might not be completely free from government prodding and might also (as is the nature of ratings agencies in general) miss the mark completely due to their sometimes arbitrary nature; this has consistently been the case with Moody’s and Fitch, most catastrophically in the pre-2008 period, when they both failed to predict the size and magnitude of the housing bubble which eventuated into the Great Recession. To be sure, Indian and Chinese MNCs are cloaked with immense capital and are in positions to make investments and entire acquisitions provided the prospective market is bullish enough. To that end, they have been “on the offensive,” to borrow from Dr. Philani Mthembu’s new book on India and China, subtitled The Rise of Southern Powers. Tata Motors acquired Jaguar Cars, along with Land Rover Ltd., for US$2.3billion, and Suzlon Energy Ltd., for US$546-million, bought a 30% stake in German wind turbine manufacturing company, REpower Systems, in 2008 and increased it to 92% by 2009 while GMR Infrastructure bought half of Dutch power producer N.V. InterGen for US$1.107-billion (which in 2010 it sold to a Chinese firm). Indian MNCs’ appetite has also been targeted at well-performing African companies; with Bharti Airtel Ltd. acquiring Nigerian mobile operator Zain Africa B.V. for a staggering US$10.3-billion in 2010. Likewise, Chinese companies have bought stakes in everything from aircraft to coal companies, including a 49% stake in South Korean automobile manufacturer, Ssang Yong Motors, for US$500-million by Shanghai Automotive Industrial Corporation (SAIC).

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TCL also acquired all of Thomson Electronics for US$560-million and Yanzhou Coal all of Felix Resources. Russian firms have also not missed out on the action, such as when in 2010 the Russian telecommunications giant Vimpelcom acquired 51% of Egypt’s Orascom Telecom. How have South African firms been faring? And particularly regarding the stock market, what have been the general trends in recent years? Fortunately, the South African stock market is not only consistently ranked among the best in the world (having been ranked among the top twenty stock markets within the World Federation of Exchanges in recent years), but also the South African market has been open to listing and investing by foreign entities since 2004, and dual listing since the 1990s. As a result, the JSE equity market is an international market, with JSE-listed shares being accessible to domestic and foreign investors. This means that we can measure both outward and inbound investment and listing, and mutual listing by BRIC-country domiciled companies, however imprecisely. Owing to its global stature as a well-regulated and well-governed platform, the JSE, now under its fourth chief executive in Nicky Newton-King, should in theory be one of the most attractive market places in the world for capital-laden investors as generally characterizes the BRIC MNCs, thought asymmetrically so. With over 379 domestic listed companies and 800 instruments such as derivatives with a total daily market cap of ZAR312-million, the JSE ought to be ripe for cross-BRIC investment. This should be all the more so since in 2011, the seven BRICS country stock exchanges agreed on a crosslisting benchmark equity index for derivatives—indicating a mechanism for their investors to keep abreast on the general trends in one another’s top performers (those listed on the Top40 Index in the case of the JSE) and purchase these, as a further incentive, in their own home countries. A historic first, it would also allow them portfolio diversification, and would also give the rest of us an indicator of how well they estimated each other’s economic futures. Tantalizingly, these exchanges at the time reached a combined market cap of US$9.02-trillion, and an equity market trading volume of US$422-billion per month—along with 9, 481 companies.

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BRIC Investment in the South African Stock Markets, 2010–2018 As South Africa has an average savings-to-GDP ratio of an estimated 19.5% by the South African Reserve Bank (SARB 2019: 87),32 foreign investment is needed to compensate for this domestic shortfall in capital. In the economy in general, the total stock of foreign capital invested in South Africa relative to the GDP is presently 49%. This is nearly replicated in the stock market and exceeded in some of the top performing stocks. As a result, by October of 2017, foreign investment composed some 38% of JSE-listed company ownership (Ndzendze 2018b). And within individual companies, the share of foreign ownership has risen from 30% in 2008 to around 37% in 2016. Within the top twenty-five largest companies by market cap, foreign ownership is at 11%. In the JSE Top 40, only 8 companies, mainly the smaller ones, are more than 75% owned by South Africans (Ndzendze 2018a, b). Among these rising foreign investors, the BRIC countries have made a presence, but an underwhelming one in light of their size and potential. Although it is generally the case that the five largest JSE-listed companies are essentially global in their operations, with considerable exposure to BRIC-country corporations, the inward investment has been comparatively negligible. There are three major deals which have been noticeable in the period of South African membership within BRICS. In August 2015, Gold One acquired some 19.96% of JSE-listed Sibanye Gold (JSE: SGL), becoming the single-largest shareholder in the company. The composition of Sibanye’s Chinese shareholder is interesting; being a consortium, the partners include both private and government-linked financiers such as Long March Capital and China Development Bank, respectively. An early example of India-derived investment within the JSE after SA entry into the BRICs was the listing of Oakbay Resources and Energy Ltd. (JSE: ORL), which was listed in 2014.33 Soon, however, the firm

32 SARB. 2019 (June). Quarterly Bulletin (No. 292). Pretoria: South African Reserve Bank. Available at: https://www.resbank.co.za/Lists/News%20and%20Publications/Att achments/9328/01Full%20Quarterly%20Bulletin%20%E2%80%93%20June%202019.pdf (Last accessed: 17 November 2019). 33 JSE. 2014 (November 28), ‘Oakbay Resources and Energy lists on the JSE’, JSE. Available at: https://www.jse.co.za/articles/oakbay-resources-and-energy-lists-on-the-jse (Last accessed: 29 July 2019).

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became embattled due to a wave of disclosures and allegations of the owning Gupta family’s dealings with the South African political elite, up to and including the president, Jacob Zuma. In June of 2017, the firm suspended its listing in the stock market as a result of mounting pressure from its bankers and auditors abandoning them.34 But within the same year, for £1.2-billion, Indian billionaire Amil Agarwal bought an 11% stake in Anglo-American (JSE: AGL), rendering him the second single-largest shareholder in the mining group. He followed this up with a US$1.5-billion investment, which resulted in a 20% ownership share. Anglo-American had also done its bit for BRICS commercial integration when in 2014 it made its first shipment of iron ore from Brazil from the Minas-Rio project in Minas Geris and Rio de Janeiro in the southeast of the country which it completely owns through its Iron Ore Brazil subsidiary. Further heightening the BRICS commercial web, the operation’s number-one consumer is the PRC. But crucially, although Anglo-American was founded in South Africa, in 1999 it shifted its primary listing to the London Stock Exchange and maintains only a secondary listing in the JSE, and the Minas-Rio was not so much the result of BRICS alignment as it had begun exploration in 2009 prior to SA becoming a member. South African media holdings company Naspers [JSE: NPN] has been a leader in exposure among BRICS markets. Its stake in Chinese internet company, Tencent (the fourth largest internet company in the world), remains the poster child for cross-BRICS investment due to its lucrativeness. In March, Naspers managed to sell its 2% stake (reducing its total ownership to 32%) for US$10.6-billion; in 2001, when Tencent was still a start-up in a country that had relatively few internet users unlike today, it had paid only US$32-million for its stake. Another acquisition which delivered on its promise was Naspers’ holding on an Indian firm. Naspers’ investment in Indian e-commerce giant Flipkart has, following Walmart’s purchase of its stake, paid off by about 300%. Naspers had originally invested just over US$600-million in Flipkart in 2012, for a total stake of 16.5% (Ndzendze 2018b).

34 Fin24. 2017 (June 23). ‘JSE Suspends Listing of Oakbay Resources,’ Fin24. Available at: https://www.fin24.com/Companies/Mining/jse-suspends-listing-of-oakbay-resources20170623 (Last accessed: 29 July 2019).

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Evidently, for Naspers this has been but the latest return in a slew of lucrative investments in global, including BRIC-domiciled, companies. Apart from India and China, two major acquisitions have also been made in Russia. In January of 2015, Naspers had announced a US$1.2billion (ZAR16-billion) deal to become the largest shareholder in Avito, which, enjoying 35 million unique visitors per month, is Russia’s numberone online classifieds platform. Naspers had begun buying shares from existing shareholders, thereby increasing its holding from a mere 17.4% to 67.9% by 2015. In the same country, Naspers has a stake of about 29% in the Mail.Ru Group which is based in Moscow (Ndzendze 2018b). From ICBC’s (2007-acquired) stake in Standard Bank to Gold One’s own stake in Sibanye, the majority of the investments have also been characteristic of SA-PRC overexposure. This is indicative of a traditional alignment between the two countries, with China being South Africa’s principal export and import partner. Indicators of South Africa’s market overexposure to the Chinese economy are seen in the fact that the South African rand currency is affected by sentiment toward the Chinese economy, with slowdowns (or even anticipation of slowdown) leading to declines in the value of the currency (Gwala 2016).35 The exposure’s impact on the market is also to be observed in 2017 in the Committee on Foreign Investment in the US’s reported suspicious posture toward Sibanye Gold’s then pending acquisition of Stillwater Mining Company, the leading platinum and palladium producer in the US. The alleged disinclination apparently stemmed from the group’s considerable Chinese shareholding, along with the fact that palladium and platinum are key primary materials linked to arms manufacturing. This is linked to another issue which might be symptomatic of BRICS’ non-effectiveness for South Africa as some of the deals, including the largest ones (such as the ICBC-Standard Bank acquisition), pre-dated its entry into the association. Additionally, and maintaining the traditional financial trajectory, in addition to China, for South Africa the main influx of investment on JSE-listed companies has either come from, or has 35 Gwala, Sandile. 2016. ‘Rand Depreciation,’ Deloitte. Available at: https://www2. deloitte.com/content/dam/Deloitte/za/Documents/process-and-operations/za_Rand_D epreciation_brochure_BPS.pdf (Last accessed: 17 November 2019). Gwala notes that “The Rand is one of the currencies most exposed to China, hence any adjustments to Chinese foreign policy has a direct impact on the Rand. After People’s Bank of China devaluated the Yuan by 2% in mid-2015, the Rand lost close to 26% of its value during the next six months.”

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been retained by, western financiers, and particularly those from the UK (Ndzendze 2018b). This is also the case with the other BRIC countries, who in the past decade, have seen hundreds of their companies list their shares on American and European (especially UK and Luxembourgish) stock markets (Ndzendze 2019). What then accounts for the Chinese preponderance? Despite the selfconscious attempt to compete with China, it is not the case that each successive year is characterized by inverse correlations in exports to South Africa (or the other control countries studied alongside it). Rather, China appears to be “winning” because of its own niche areas and larger economies of scale. Further, China has no years of decline, which explains why it has had a more consistent rate of exports to South Africa than India, Japan, and Taiwan—the latter two having had outright recessions in the wake of the 2008/2009 recession and some years thereafter.

1.2

Summary and Chapter Outline

In addition to this introductory chapter, this book is composed of 6 chapters and a conclusion. Chapter 2 sets the theme of the book by giving a historical background and detailing what is at stake in the various formations and ambivalent rivalries observed in the relationships between the countries and China. This is followed by case studies, from Chapters 3– 5, each essentially a self-contained study that assesses each Asia–Pacific country’s South Africa relationship and compares this with China and subsequently accounts for why China has been more integrated with South Africa than the other country in terms of trade. Chapter 3 compares the rate of growth in South African exports to Hong Kong and Taiwan between 2001 and 2017, to gauge whether its forming of relations with China to maintain access to Hong Kong resulted in a “pay off.” In the raw and statistical data for the entire period, we deduce that exports to Hong Kong outgrew those to Taiwan by an average of 2.56% per year, and a comparative growth of 40.91% for the entire period vis-à-vis Taiwan. Thus, on the face of it, we can deduce that South Africa’s decision to switch to the PRC, insofar as it was predicated on the need to maintain access to Hong Kong, was worth it. Further, Mainland China’s outgrowing of Taiwan in importance as an export market for South Africa is evident in that its exports to Mainland China between 2001 and 2017 outgrew those to the former by 13.64% per year and by 218.28% overall.

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Chapter 4 tested a hypothesis postulating that increases in People’s Republic of China exports of the given products to African countries, in this case South Africa, Kenya and Uganda, in any given year(s) between 2007 and 2017 would always correlate with decreases in Japanese exports of the specified six products to the three countries studied. Each country’s product set was chosen on the basis of the two products being primarily imported from Japan in the initial year of study, and subsequently seeing Chinese growth between then and 2017. The findings of the chapter point to uneven results among the countries, with more incidences of an inverse correlation toward China’s gain in South Africa (5/22) and Kenya (6/22), and the reverse in the case of Uganda (7/22). However, there were more incidences of correlated movement (mutual growth and mutual declines) across all countries than inverse movements, bringing the totals to a threshold-passing 35/66 (p > 33) for the former and 24 for the latter. The study indicates a general lack of zero-sum game overall as the two Asian states’ exports into the three countries on the continent have no direct impact on one another. Chapter 5 is a comparative analysis of the growth in South African exports to China and India between 2001 and 2017 and assessed why India-bound exports continue to lag behind their China-bound counterparts. Specifically, the chapter sought to test the hypothesis that South African exports to India (already growing from an already lower base when compared to exports to China) observed a combination of the following: as a proportion of themselves they grew less than exports to China on an annual basis, and secondly, that South African exports to India registered fewer years of growth than China-bound exports. Both hypotheses proved true. Firstly, in terms of growth, the data indicates that exports to China outgrew those to India for the 2001–2017 time-period by an average of 1.06% on an annual basis, and by 16.97% for the entire period. China appears to be the more significant export market for South Africa. Against the backdrop of the “new scramble for Africa” literature, Chapter 6 tested a hypothesis postulating that increases in PRC exports of the given products in the given year(s) always correlate with decreases in US exports of the specified six products to the two African countries studied. The findings of the chapter point to the lack of general replacement of the US by the PRC in the period between 2007 and 2017, however. There were, nevertheless, three (out of six) incidences of the US being surpassed by the PRC; with 1 being reversed in a subsequent

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year, and 2 of the 3 were in the Kenyan case study. In the case of South Africa, the PRC briefly and temporarily surpassed the US as the principal import source of mineral fuels in 2016, but this was subsequently reversed. Overall, the data characterizes more mutual growths, as well as mutual declines, than reverse correlations. With an eye toward the future, Chapter 7 looks at China’s growth trajectory and what implications they have for South Africa’s other highly valuable commercial partner, the EU. The chapter conducts an assessment of European and Chinese exports to South Africa over the 2007–2018 period. Findings indicate that Chinese exports to South Africa have not supplanted total EU exports to South Africa, unlike the case with the country’s other previous leading trade partners in previous chapters. However, in this timeframe, China’s rate of growth has outgrown that of Europe, and some products which were principally sourced from the EU were subsequently imported more from the PRC. This indicates that if the present trajectory continues, China will replace Europe as the principal export partner of South Africa within a decade or a little over it. The onset of Brexit, with the UK being a key trade partner for South Africa within the EU, will expedite this trend by diminishing the gap between the EU and PRC’s respective exports to South Africa. Finally, Chapter 8 reflects on the collective implications of the findings made in the preceding chapters, seeking to formulate a theoretical framework, both for policy and theory, as well as ponders some prospects. The findings of the book are overall compelling in that they demonstrate that while there may be a competition for market access, mutual growth is still possible and indeed the dominant trend, at least vis-à-vis South Africa and its peer economies.

References Alexandroff, Alan S. 2015. South Africa in a Complex Global Order: How and Where to Fit In? South African Journal of International Affairs 22 (2): 249– 268. Bheemaiah, Kariappa, Mark Esporito, and Terence Tse. 2020. Are We Experiencing a K Shaped Recovery from COVID-19? World Economic Forum, December 22. Available at: https://www.weforum.org/agenda/2020/12/kshaped-covid19-coronavirus-recovery/ (Last accessed: 23 January 2022). Crawford, Emily. 2019. Made in China 2025: The Industrial Plan that China Doesn’t Want Anyone Talking About. PBS, May 7.

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Ndzendze, Bhaso. 2022, Forthcoming. World Bank ‘Doing Business’ Index Scores and FDI Influx: Findings from Four African Countries, 2009–2017. Berlin: APRI. Qobo, Mzukisi, and Memory Dube. 2015. South Africa’s Foreign Economic Strategies in a Changing Global System. South African Journal of International Affairs 22 (2): 145–164. PRC Government. 2015. ‘Made in China 2025’ Plan Issued, May 19. Available at: http://english.www.gov.cn/policies/latest_releases/2015/05/ 19/content_281475110703534.htm (Last accessed: 4 November 2019). Romei, Valentina, and John Reed. 2019. The Asian Century Is Set to Begin. Financial Times, March 26. Available at: https://www.ft.com/content/520 cb6f6-2958-11e9-a5ab-ff8ef2b976c7 (Last accessed: 17 November 2019). SARB. 2019. Quarterly Bulletin (No. 292), June. Pretoria: South African Reserve Bank. Available at: https://www.resbank.co.za/Lists/News%20and% 20Publications/Attachments/9328/01Full%20Quarterly%20Bulletin%20% E2%80%93%20June%202019.pdf (Last accessed: 17 November 2019). Toyana, Mfuneko. 2021. Foreign Investment into South Africa Tanked in 2020 After Ramaphosa’s New Deal Falters. Daily Maverick, August 2. Available at: https://www.dailymaverick.co.za/article/2021-08-02-foregin-investmentinto-south-africa-tanked-in-2020-after-ramaphosas-new-deal-falters/ (Last accessed: 23 January 2022). UNCTAD. 2021. Investment Flows to Developing Asia Defy COVID-19, Grow by 4%. UNCTAD. https://unctad.org/news/investment-flows-developingasia-defy-covid-19-grow-4. United Nations. 2015. Asia-Pacific Trade And Investment Report 2015. United Nations Economic and Social Commission for Asia and the Pacific. Available at: https://www.unescap.org/sites/default/files/Asia-Pacific%20Trade% 20Brief.pdf (Last accessed: 3 November 2019). der Westhuizen, Van, and Janis and Smith, Karen. 2015. Pragmatic Internationalism: Public Opinion on South Africa’s Role in the World. Journal of Contemporary African Studies 33 (3): 318–347. Yan, Sophia. 2017. Made in China’ Isn’t so Cheap Anymore, and That Could Spell Headache for Beijing. CNBC, February 27. Available at: https://www.cnbc.com/2017/02/27/chinese-wages-rise-made-in-chinaisnt-so-cheap-anymore.html (Last accessed: 18 December 2021).

CHAPTER 2

China and the Contemporary Asian Balance

2.1

Introduction

Our starting point in attempting to determine the influence of regional politics in Asian states’ African policies must be an assessment, a survey of sorts, of the “Asian balance” and its evolution in the past three decades. China’s disputes with each of the states in the twentieth and early twentyfirst centuries form such a starting point. Considered to its logical initial points, each could see us delve as far back as the mid-nineteenth century into imperial China and its decline in the wake of foreign powers, along with the Meiji restoration. These two events, the former inextricably leading to the latter, culminated in the First Sino-Japanese War in 1894 and 1895. The period was followed by Japanese aggression toward Korea (colonizing that kingdom in 1910), and then the north of China’s mainland in 1931. Tensions between the Chinese republic and the Japanese empire escalated in 1936. This makes that year the retroactive starting point of the Second World War. History casts a long shadow. As such, China’s relations with three of its neighbors—Taiwan, Japan, and India— are characterized by territorial disputes, and historical hang-ups (centered around acknowledgment of atrocities). Across the Pacific Ocean, lies the US, with whom the country has policy disagreements, as well as a

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_2

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perceived rivalry for global supremacy (Allison 2017). Further entanglements are to be found in the web of alliances, backed by mutual defense treaties, that the US has with many countries in the region, and its explicit military presence in bases in Japan and South Korea along with naval tours of waters China deems as its own in the South China Sea. The relations manifest themselves in different ways, but, this book argues, this has been short of war since the Korean War (1950–1953) in the East and the brief Sino-Indian War (October and November of 1962) on the western front. At the root of this long peace is opportunity cost for these countries for pursuing the course of war with China. Put simply, there is a persistence of trade and interdependence that outweighs these issues, along with a US presence and an ambivalence toward one another (most pressingly in the Japan–South Korea relationship), due to a desire to counterbalance against one another which have halted these tense relationships from imploding into war. Nevertheless, these do not do away with the inherent mutual suspicions. It is worth also noting that the democratic institutions of India, Japan, and Taiwan mean that there are domestic audiences to be appeased through tough posturing toward China, who also, despite single party communist rule since 1949, likewise has a proud civilization eager to reverse a century’s worth of humiliation, and a regime eager to exploit these sentiments.1 As is the nature of governments, all these countries and China have also been observed to use these external issues as pretexts for deflection.2 At the same time these elites conversely gain prestige for successfully negotiating with China and deescalating.3 In such fashion, then, are the regional 1 South China Morning Post, ‘China Protests over Indian President’s Trip to Contested Border Area,’ South China Morning Post, November 20, 2017. Available at: https://www.scmp.com/news/china/diplomacy-defence/article/2120731/chinaprotests-over-indian-presidents-trip-contested (Last accessed: 2 November 2019). 2 2019 findings by Pew indicate that in the Asia–Pacific, China is viewed favorably only by some 36 and 57% unfavorably. Within India and Japan, the numbers are even less at 26 and 13% respectively. See: Silver, Laura, Devlin, Kat and Huang, Christine, ‘People Around the Globe Are Divided in Their Opinions of China,’ Pew Research Center (2019). Available at: https://www.pewresearch.org/fact-tank/2019/09/30/people-around-the-globeare-divided-in-their-opinions-of-china/ (Last accessed: 2 November 2019). 3 Writes one Indian think tank about the resolution of the standoff at Doklam involving China and Bhutan with whom India has a mutual defense pact after China failed to illegally construct roads on its territory: “This is a huge political, diplomatic and moral victory for India. It will contribute to raising the stature of the country and of Prime Minister Modi even higher in the international community. The fact that the Indian

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relations and domestic politics motivators of tension and guarantors of stability in the region. Incapable of outright war at home, these countries compete for the sake of balance elsewhere. Vying for the attentions of the ASEAN countries is the most prominent such site, but this extends itself globally, and in different ways. For Taiwan, the most zero-sum such competition, it is recognition as the “one China” with Taiwan making itself visible through commercial as it loses on diplomatic means. For Japan and India, it is access market to new markets and investments in frontier or under-explored markets. For this reason, Africa gets their attention. Celebrated on the continent as a source of diversification for their burgeoning markets and for new investments, many official reports in New Delhi, Washington, Beijing, Taipei, Brussels, Paris, and Tokyo note one another’s presences on the continent as encroachments. The aim of this chapter is to provide the foundation for the book by laying out its core premise; there is competition between China and its respective Asian neighbors, which has global implications. Particularly, then, these implications are examined through their meaning for South Africa. The chapter proceeds in two sections. The second section explores its foreign policy toolkit. The third section looks at China’s rivalries in greater detail—in terms of how they play themselves out and their relevance for South Africa and its relationship with China—in anticipation of the analysis to take place in the subsequent chapters which are bilateral analyses of the China–South Africa relationship and the role of third parties.

2.2

China’s Foreign Policy Toolkit

In 1980, the PRC had a GDP of US$300-billion, placing it seventh globally behind Italy (Country Economy 2021). By 2015, that number was US$11-trillion, rendering China the second largest in the world (Allison 2017: 6). In the same period, its trade with other countries grew from government stayed steadfast and resolute and did not blink even in the face of extreme provocation, speaks volumes of the determined and decisive approach of the present government. The episode has significantly burnished the image of India as a responsible, decisive and reliable actor on the global scene.” See Sajjanhar, Ashok, ‘The Doklam Crisis Ends: A Diplomatic Victory for India,’ Observer Research Foundation, August 30, 2017. Available at: https://www.orfonline.org/expert-speak/the-doklam-crisis-ends-a-dip lomatic-victory-for-india/ (Last accessed: 2 November 2019).

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US$40-billion to some US$4-trillion. This indicates a 100-fold increase. Inevitably, this has led to deliberations about the significance of this for the contemporary global hierarchy.4 The most notable work on this in recent times has been Graham Allison’s Thucydides Trap.5 Early on in his book, Allison recounts a conversation with the Singaporean leader Lee Kwan Yew, in which the latter once predicted that “the size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player” (Allison 2017: 6). The author, upon asking “what does Xi want?,” subsequently answers: “To make China great again” (p. xviii).6 In other words, China wants “total respect” (Allison 2017: xviii). Nevertheless, there is skepticism as to the degree to which the PRC can instrumentalize this. To begin with, the first assumption within works such as these is that the country is in a position to carry out a uniform or centralized foreign policy. This assumption been placed under question, however. In his 2017 article, “Growing Diplomacy, Retreating Diplomats,” Jing Sun examines the puzzle of the relative decline of the Chinese Ministry of Foreign Affairs (MOFA) in spite of the country’s “expanding diplomatic needs” (p. 419). Going against the traditional route of treating China as a unitary rational actor with coherent calculations for a particular set of its interests, Jing problematizes this, finding that policymaking is a contested process with rampant inter- and intra-governmental competition (p. 421). Thus, before the 1970s, when China was relatively closed off, the conduct of diplomacy was the preserve of a few elites. Moreover, those who had the ability to travel abroad were looked at “with awe and envy” (Sun 2017: 421). That is no longer the case, however: Today, China’s reach has become global. Countless domestic actors – national, local, public, and private – interact with the world. For the 4 Martin Jacques’s When China Rules the World (2009) was the earliest; Hal Brands’ American Grand Strategy in the Age of Trump (2018). Paul Kennedy’s framework has been a continual reference point for other subsequent scholars seeking to characterize the rise of China as indicative of a power shift, even if they do not entirely take it on board. 5 “What is this book’s Big Idea? In a phrase, Thucydides Trap. When a rising power threatens to displace a ruling power, alarm bells should sound: danger ahead” (Allison 2017: vii). 6 This “limits the notion of China becoming a ‘responsible stakeholder’” (Allison 2017: xviii). This is especially heightened by clash of civilization thesis advanced by Samuel Huntington.

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rational actor model to hold, one has to assume that either none of these actors matter in foreign policy, or that they have identical policy preferences. Neither assumption is convincing. (Sun 2017: 421)

At the core of Jing’s argument, then, is the decline of the MOFA. This comes down to four reasons. The first reason, namely institutional design, originates from the top: “The Chinese Communist Party (CCP) has consistently prioritized domestic over foreign agendas. The MFA staff must be unswervingly loyal to the Party” (Sun 2017: 420). This goes back to the influence of Zhou Enlai, the PRC’s long-serving Premier (in that office from 1949 to 1976) and chief diplomat (1949–1958), who demanded that his diplomats carry out their duties as “plainclothes People’s Liberation Army soldiers.” This has a paradoxical effect in that “the MFA’s professionalization contributes to the decline of its policy leverage” (Sun 2017: 420). The second reason stems from intraministerial factors; as it has matured, this has led to “an increasingly professional but docile career bureaucracy” (Sun 2017: 420). Furthermore, MFA officials have been accorded with less prestige over the years. Noting that “executing Chinese diplomacy has always been a political process,” it is simultaneously to be observed that “recent MFA heads have been denied a crucial access point to decision-making at the core – i.e., a position in the CCP’s top leadership” (Sun 2017: 420). This pattern has continued under Xi. This professionalization of the MFA “has been coupled with the delinking of top MFA officials from the core of the Party’s decision-making process.”7 The metaphorical “ladder up to the Party’s core” has swiftly disappeared over the last thirty years (Sun 2017: 420). This marginalization of personnel is apparent when one examines the backgrounds of China’s top diplomat—the foreign minister:

7 “The MFA, like other Chinese governmental agencies, has come to be managed by technocrats. These are trained experts with knowledge in specific functional issue areas. Though anyone with a college degree may apply to the ministry, its entrance examination clearly favors those majoring in foreign languages, political science, and international business” (p. 423). For example, China’s Ambassador to South Africa at the time of writing, Lin Songtian, is a career diplomat whose career began in 1986 at MOFA and progressed within the ranks until obtaining the rank of Ambassador in 2003. See Embassy of the People’s Republic of China in the Republic of South Africa, ‘Resume of H.E. Ambassador LIN Songtian,’ August 9, 2017. Available at: http://za.china-embassy.org/eng/ dsxx/dsjl/t1483382.htm (Last accessed: 16 May 2019).

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Since 1998, China has had four foreign ministers. They constitute the third, technocrat generation. All four received college education under the PRC; all of them majored in foreign languages, and all of them were career diplomats. Their post-MFA career achievements were lower than those of their predecessors: none became vice premier, and none joined the Politburo. (p. 423)

For the ministry to matter, its leader would have to be a formal part the Party’s core (Sun 2017: 420). “After all, under the Party’s monopoly, a leader’s political or military title has always been more important than his ministerial one” (Sun 2017: 420). However, there has been an unmistakeable decline in the prestige that the foreign ministers simultaneously hold while having this position or go on to hold after it: over the years, these men have moved from Premier (Zhou himself from 1949 to 1976) and marshal (Chen Yi in the 1970s) to vice premier (Huang Hua and Wu Xueqian in the 1980s, and Qian Qichen and Tang Jiaxuan in the 1990s) and then to state councilor (Tang Jiaxuan, Yang Jiechi, and Wang Yi in the 2000s). The third reason behind the MFA’s decline comes horizontally, and is due to competition among ministries (Sun 2017: 420). The ministry of foreign affairs faces the most competition from China’s military. The military has a higher ideological standing and can lay claim to a direct lineage to those responsible for the founding of the CCP and the establishment of the modern Chinese state. Equally important are demographic differences. The military draws its ranks from the rural population, and is taught to be more nationalistic in outlook. Keen to do more, the military has played an active role in China’s diplomacy. Crucially, this has often been to the direct contradiction of the career diplomats. The competition tilts in favor of the military: Diplomats… hold pens, not guns. It is institutionally impossible for them to launch any credible threat to the Party. In other words, while the military needs to be tamed, toothless diplomats are tamed by default. The Party core has little to fear when it chooses to axe the MFA’s power.8 8 “Meanwhile, the PLA demographics continue to be predominantly rural. The epistemic communities the MFA and the PLA belong to are markedly dissimilar. Armed with guns, populated with people from poorer and more nationalist regions, and proud of direct lineage from the CCP bloodline, the military has been getting louder in voicing its own stance on diplomacy” (Sun 2017: 429).

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The challenges to the MFA do not end here, however. “At a time when China shut its door, Chinese diplomats enjoyed a near-monopoly of interacting with the world. This privilege contributed to the ministry’s prestige. In the 1980s, the reform and open-door policy empowered those ministries administering trade and commerce, especially the Ministry of Foreign Economic Relations and Trade [MFERT]” (p. 427). Further challengers are resident in the following: • • • • • • • • • •

the International Department of the Central Committee; the NPC Foreign Affairs Committee; Ministry of Commerce; Ministry of Culture; Information Office of the State Council; General Staff Department of the PLA; the Supreme Court; the General Prosecutor’s Office; foreign affairs offices at the provincial level; and chief administrators of major banks.

Others, such as the Ministry of Education, “are actively conducting their mini diplomacy through subsidiaries like the Confucius Institute” (p. 430). The final reason for the MFA’s decline stems from societal pressure. Such pressure takes multiple forms. One stems from “the popular tendency of blaming the MFA for China’s diplomatic woes, thus making the ministry a scapegoat by default” (Sun 2017: 429). Secondly, “the Party leadership’s populist message has over-stretched the MFA’s resources” (Sun 2017: 429). China’s developing living standards have also limited the appeal of the MFA to potential new recruits. To begin with, traveling abroad has become affordable for millions of Chinese citizens. By 2014, the US diplomatic missions alone issued close to 1.6 million non-immigrant visas to Chinese visitors. This has led to a major brain drain. The MFA has also been the subject of ridicule. According to an MFA spokesperson, “the ministry has been receiving calcium pills on a regular basis – a popular choice of insult from a public that sees the Chinese diplomats as spineless” (Sun 2017: 429). In the online world, the MFA has garnered the unofficial name of “the Ministry of Protests” due to its tendency to its limited toolkit outside of denouncing certain international developments (Sun 2017: 429).

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But the power of China is unmistakeable: “Even after its lower growth rate in 2015, China’s economy created a Greece every sixteen weeks and an Israel every twenty-five weeks” (Allison 2017: 7). In 2005, for example, “the country was building the square foot equivalent of today’s Rome every two weeks ” (Allison 2017: 13; emphasis added). China has been proficient in its use of geoeconomics, which is defined as “the use of economic instruments to achieve geopolitical goals” (Blackwill and Harris 2016). More specifically, these include “trade and investment policy, sanctions, cyberattacks, and foreign aid” (Allison 2017: 20). War by Other Means: Geoeconomics and Statecraft by Blackwill and Harris (2016) argues that despite China’s use of geoeconomics, “it also has been perhaps the major factor in returning regional or global power projection back to an importantly economic (as opposed to political-military) exercise.” As Allison states it, “China primarily conducts foreign policy through economics because, to put it bluntly, it can” (Allison 2017: 21). It is easier for the country to do so because, sometimes despite itself, it holds the unique advantage of being the largest trading partner for some 130 countries, “including all the major Asian economies” (Allison 2017: 21). Comparatively, “its trade with members of the Association of Southeast Asian Nations accounted for 15% of ASEAN’s total trade in 2015, while the US accounted for 9 percent” (Allison 2017: 21). The many countries that have developed a dependency on China for key imports, as well as its markets, have a vulnerability which is akin to that seen toward the US in prior decades. Despite claims of noninterference, when disagreements arise, statements are made or mere opinions are expressed, China is able, and often eager, to draw on a multitude of strings to extract desired behavior from those trade partners. Some cases include the abrupt halting of all exports of rare metals to Japan in 2010 over territorial disputes. Another was cutting off salmon purchases from what had been Norway’s number-one market in 2011, “to punish Norway for the Nobel Peace Prize Committee’s selection of a noted Chinese dissident, Liu Xiaibo” (Allison 2017: 21). There was also the prolonged inspection of bananas from the Philippines “until they had rotted” in 2012, with the view to “change the Filipino government’s calculations about a dispute over Scarborough in the South China Sea” (Allison 2017: 21). In every respect,

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China enjoys such a superiority in its balance of economic power that many other states have no realistic option but to comply with its wishes, even when the international system is on their side. In 2016, for instance, China flatly rejected an unfavourable ruling by the Permanent Court of Arbitration over a dispute with the Philippines in the South China Sea, setting the table for another contest of wills. In this standoff and others involving the South China Sea, China has demonstrated an ability to combine charm, largesse, bribes, and blackmail to find “compromises” that give it most of what it wants. (Allison 2017: 22)

This is set to expand, in the wake of the 2013 launch of the Asian Infrastructure Investment Bank (AIIB) which came about following years of US refusal to accommodate the PRC’s request to have a larger share of the votes at the World Bank (Allison 2017: 22). US efforts to pressure other countries, including prominent allies such as the UK, not to join the bank came to naught as 57 countries signed up before its official launch in 2015. Their incentives for doing so are obvious: “They said no to the United States and yes to China in the hope of receiving loans at below-market rates and contracts for large construction projects funded by the bank” (Allison 2017: 22). They could do so with some reason, too, as China had a track record of this. It had cultivated a reputation for action and throwing seemingly endless amounts of money toward major projects in other countries. For years prior to the launch of the AIIB, the China Development Bank had outperformed the World Bank as the world’s biggest financier of projects. China committed $30-billion to the AIIB and an eventual $1.3-trillion infrastructure investment under the umbrella of the BRI. This is the equivalent of 12 Marshall Plans even after adjusting for inflation (Allison 2017: 24).

2.3

China’s Regional Rivalries

China’s status as a rising power is rendered unique among previous such states by its being the only such claimant to have more than a handful states with whom it shares borders. The US has two, mostly friendly, and certainly weaker, neighbors in Canada and Mexico. (Though relations with Mexico escalated on numerous occasions and saw outright war and annexation of Mexican territory in the 1840s). Portugal had

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China

Light of Heaven

Other polities

Fig. 2.1 Representation of imperial China’s conception of the world (Source Author. See also Adapted from Sheng, Shirley Ye and Shaw, Eric H. (2007). ‘The Evil Trade that Opened China to the West,’ CHARM )

one, Spain, while Spain itself had two (Portugal to the west and France to the northeast). The Dutch Republic had about seven, though these were mostly weak Germanic principalities. The German Empire comes the closest, with 9 in 1914. This is still short of China’s total 14, and the number increases when we consider the countries across its shores. In its pre-nineteenth-century incarnation, there were even more polities with which the country neighbored; this led to interesting configurations in an attempt to manage these relationships by the imperial state. Most notable is that it became wedded into Chinese mythology, always an important element in policymaking in the ancient empire, that China could not extend itself outward because doing so would reap no gain. Moreover, the very act of expansion would be exposing the Chinese civilization to a darkness, and its rule to barbarians (Sheng and Shaw 2007). Instead, China presided over a tributary system (chaogong tizhi 朝贡体制) with its most immediate neighbors, including Korea, and predecessors of the modern Vietnam, Bhutan and Thailand (Zhang 2013) (Fig. 2.1).9 9 See Zhang, Yongjin, ‘The Tribute System,’ Oxford Bibliographies, April 22, 2013. Available at: https://www.oxfordbibliographies.com/view/document/obo-978019 9920082/obo-9780199920082-0069.xml (Last accessed: 6 November 2019). “There Is

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In practice, the precise meaning of the tribute system is the subject of debate (including the extent to which the neighboring countries accepted their lower status), but its origins lie in trade. Nevertheless, the consensus is that it was catalytic to the formation of a Sinocentric world order in East Asia (Zhang 2013; Sheng and Shaw 2007). The system came to a collapse with the onset of the treaty system following the Opium War in 1840 and the Treaty of Nanjing (1842) which followed it (Zhang 2013). These unfair treaties initiated the century of humiliation, at the hands of the West and of Japan (and, to a seemingly less remembered degree, Russia),10 whose end was symbolically broken off by the emergence of the People’s Republic of China in 1949, which in turn was the opening salvo for new rivalries. This period included territorial disintegration and cruel slaughter, including the infamous Nanking Massacre (or “Rape of Nanking”) in which Japanese soldiers tortured, mutilated, and killed some 300,000 Chinese people in a space of six weeks in that city in 1937 (Chang 1997). To be sure, not all of China’s modern-day relations are fraught with dispute. Indeed a stark contrast is discernible between China’s relationships with India, Japan and Taiwan on the one hand, and the countries of Central Asia of the former USSR, on the other, which are very tranquil despite a 3300 km boundary overall. This has been achieved and maintained through the framework of what evolved into the early Shanghai Cooperation Organization (SCO), buttressed by an economic dependency on China by those neighbors. Indeed, the collapse of the Soviet Union could have multiplied China’s frontier and territorial problems; it led to China having four new neighbors (with the inclusion of the Russian Federation), and therefore three new potential disputes. Yet relations between China and these countries—Kazakhstan, Kyrgyzstan, and Tajikistan—turned out very peaceably. The first step was China’s immediate recognition of these new states as being independent in the early 1990s after they declared themselves as such. Buoyed by this initial success, this also Broad Agreement That a Tribute System of a Sort Existed and Operated to Regulate China’s Trade and Diplomacy with Its Neighbours at Least as Far Back as the Han Dynasty (206 BCE–220 CE)” (Zhang 2013). See Cohen, Warren I., East Asia at the Center: Four Thousand Years of Engagement with the World (New York: Columbia University Press, 2000). 10 It is worth recalling that the Russo-Japanese War of 1905, which was won by Japan, was over a Chinese seaport (Port Arthur), and that Vladivostok was handed over to Russia by China in the imbalanced Treaty of Beijing signed in 1860.

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group met in Almaty, Kazakhstan, to further their cooperation beyond border confidence building to focus on the growing threats of religious extremism, ethnic separatism, and emerging terrorism in the region in 1998. From 1999 onward, the group began regular and institutionalized channels among Prime Ministers and government officials responsible for foreign policy, defense policy, and law enforcement. In 2001, the SCO was formally established and the then six member states (China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan) adopted the Shanghai Convention on Fighting Terrorism, Separatism, and Extremism. Purportedly, the group was the product of a desire for mutual benefit, respect for cultural diversity, and common development (SCO Charter 2002). The SCO is not without friction, however. In its early days, as is the case today, China had to show sensitivity toward Moscow—traditionally the leader in the Central Asian region—and anticipate accusations of aspiring to regional hegemony.11 But what serves as an adhesive and tranquilizer in the SCO is their collective desire for political stability over democratization; with much anxiety being drawn from the so-called color revolutions in the former Soviet sphere (occurring disparately between 2003 and 2010); Washington was seen, at least in part, as a provocateur in these. Furthermore, the post-9/11 involvement of the US in Central Asia, with Washington being a major donor to the countries of the region for their collaboration. But the growth of China has been concomitant with its stature in the region including in its ability to provide funds. Beijing views the region not just in political and security terms, but also as an emerging area of growing great power competition affecting not only China’s security interests as well as being a major source of energy supplies. Thus, China has made a US$3.5-billion investment in a 3000 km PRC-Kazakhstan oil pipeline. In October of 2005, the China National Petroleum Corporation had completed a US$4-billion takeover of PetroKazakhstan. Apart from serving as an outlet to the sea for the Central Asian states, China’s trade with the countries of the region grew from US$459-million in 1992, to US$2.4-billion in 2002, to US$30billion in 2008, and US$33-billion in 2019. By 2017, US$304.9 billion 11 Akita, Hiroyuki, ‘Russia and China Romance Runs into Friction in Central Asia,’ Nikkei Asian Review, July 29, 2019. Available at: https://asia.nikkei.com/Spotlight/ Comment/Russia-and-China-romance-runs-into-friction-in-Central-Asia (Last accessed: 1 November 2019).

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in contracts had reportedly been signed between China and the countries as part of China’s ambitious Belt and Road Initiative (BRI), which had also been pronounced by President Xi Jinping in 2013 from a podium in Nazarbayev University in Kazakhstan. The PRC also gave recovery loans worth US$10-billion to countries in the region after the 2008/2009 global economic crisis. These gestures, and the cordial state of relations they have won for China with these countries, are set to continue with the advent of the BRI, especially with Kazakhstan, the largest and most populous of these states and the principal trading partner of China in the region. Moreover, as these countries’ external reach, including and especially toward Africa, is limited we can thus reasonably anticipate no new Africa-facing developments. We turn below toward the Southeast Asian region. China’s relationships there have also mostly been cordial. The region, with countries that are ethnically diverse, politically fractured, and densely tropical, have also had separatist elements along their unreachable areas. Here, too, China has been a source of infrastructure, trade and economic aid. China’s strength in the region has stemmed from its comparative size compared to each of them as well as the countries’ uncoordinated efforts in dealing with Beijing. The Mekong River, for example, runs downstream from the Tibetan Plateau in China through Myanmar, Laos, Thailand, Cambodia, and Vietnam. China instead has had individual, bilateral agreements between itself and these countries. In Cambodia, where war ravaged the country in the 1960s and 1970s and foreign intervention followed suit in the 1980s and saw the overthrow of Pol Pot, reconstruction has been a lengthy process that is still being pursued in the twenty-first century. This has led to the avowedly communist country being in the position of being the poorest in the region (see Table 2.1). Table 2.1 Southeast Asian countries’ GDP per capita (in thousands of US$)

Country Thailand Laos Vietnam Myanmar Cambodia Source World Bank (2019)

GDP per capita in 2018 17,870 7023 6775 6138 4001

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Table 2.2 Southeast Asian states by population

Country

Total population in 2018 (million)

Vietnam Thailand Myanmar Cambodia Laos

95 69 53 16 6.7

Source World Bank

Because of this position, Phnom Penh has found itself being virtually dependent on the PRC; up to 25% of the country’s trade is with the PRC, while it has also been a major recipient of critical Chinese aid from Beijing for decades (Zhou 2019: 95); as recently as 2019, the Chinese president pledged US$800-million to be granted to the country over the 2019– 2021 period (Strait Times 2019; January 23).12 In turn, the country has been characterized as virtually having no relations with the west, and reportedly acts as Beijing’s bulwark within the ASEAN, where it is a rare example of a China-leaning member, and prevents the association from formulating a collective position on China. However more and more of the country’s exports in recent years have been destined for the US. In 2016, for example, some 21% of its goods (some US$2.1-billion) went to the US.13 Another state which tends to be seen in such terms though less so is Laos. The only landlocked state in the sub-region, it also has the second-highest GDP per capita (Table 2.1), and the lowest population (Table 2.2). The country has the distinction of having had more bombs dropped on its territory in the course of the US war in Vietnam than Germany and Japan had during WWII. As such is not western-leaning. Perhaps partially resulting from this, some 30% of its trade is with China; however,

12 Strait Times. ‘China Pledges $800 m in Aid to Cambodia,’ Strait Times, January 23, 2019. Available at: https://www.straitstimes.com/asia/se-asia/china-pledges-800min-aid-to-cambodia (Last accessed: 12 November 2019). See also Zhou, T. ‘A Blend of “Hard” and “Soft” Assistance: China’s Aid to Cambodia,’ 95–112, in Huang M., Xu X., Mao X. (eds) South-south Cooperation and Chinese Foreign Aid (Singapore: Palgrave Macmillan, 2019). 13 MIT, ‘Where Does Cambodia Export To? (2016)’, MIT Observatory of Economic Complexity (2019). Available at: https://oec.world/en/visualize/tree_map/sitc/export/ khm/show/all/2016/ (Last accessed: 12 November 2019).

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exports to Thailand and Vietnam has also been significant and have formed respective 38 and 16% of the country’s exports in recent years.14 However, Chinese investments have seen the country’s railway networks rehabilitated. Myanmar has also seen Chinese investments trickle in for its infrastructural rehabilitation as well as for new pipelines, ports, and railway lines. The country is crucial for China’s goal of bypassing the Malacca straits, which are dominated by Malaysia, Singapore, Indonesia, and Thailand, all US allies. The chokepoint in these straits is the world’s busiest since some 25% of world trade passes through it. The number for Asia is even higher as some 60% of Asia’s total trade is conducted through the straits. Despite accusations of debt trap diplomacy in the region, the region has been eager to participate in the Belt and Road Initiative, with one Myanmar minister characterizing it in these terms: “what China is doing is prosper neighbour policy and we are all for it” (in Ma 2018; June 30).15 Indeed, both countries have been prompt to distance themselves from readings of nefarious intentions on the part of China and have publicly affirmed the cordial and fair nature of their relationship (Ma 2018; June 30). Other relationships, however, though just as (if not more) economically vibrant, have been less one-sided, or indeed uninterruptedly cordial. In their dealings with China, not all the Southeast Asian countries have been accused of being dominated by China. Thailand, for example, has a history of successfully deflecting major powers. The only country in the region to never be colonized by Europeans it has a long-running alliance with the US (dating back to the 1833 treaty) that was briefly in abeyance during WWII (mainly at the behest of imperial Japan), it subsequently resumed relations with the US in 1954 (boosting them with the 1962 Thanat-Rusk communiqué) and was a bulwark against communism during the Cold War. It has further bolstered security and commercial ties with the US, South Korea, Taiwan, and Japan. Its lack of a shared border

14 MIT, ‘Where Does Laos Export To? (2010)’, MIT Observatory of Economic Complexity (2019). https://oec.world/en/visualize/tree_map/sitc/export/lao/show/ all/2010/ (Last accessed: 12 November 2019). 15 Ma, Josephine, ‘There’s No Chinese ‘Debt Trap’, Says Myanmar Minister, as Government Pushes for Joint Port Project to Go Ahead,’ South China Morning Post, June 30, 2018. Available at: https://www.scmp.com/news/china/diplomacy-defence/art icle/2153210/myanmar-minister-dismisses-chinese-debt-trap-fears-over (Last accessed: 12 November 2019).

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with the PRC has also reportedly made it more confident and less dependent on China. Vietnam, on the other hand, does share a border with the PRC and, with its history of warfare with China, has shown considerable strength toward the much larger neighbor against Beijing, against whom it also has long-standing territorial claims in the South China Sea. Moreover, China is just as weary of Vietnam because of its strength, as well as its network of alliances with the US, India, Japan, and even Russia. But not all of China’s rivalries, including the one with Vietnam, have been (so far) consequential for the China–South Africa trade relationship and are therefore not studied in greater depth in this book. On the other hand, though there have been tensions between South Korea and China, these have been rather mild and to an extent a proxy for US– China tensions. This was seen for example when the US introduced the Terminal High Altitude Area Defence (THAAD) system in South Korea for its defense against potential North Korean missile attacks in 2017, and China subsequently halting tourism to South Korea (Stiles 2018). Nevertheless, this phenomenon is relatively recent and there have been no pronounced implications for China–South African trade that have been seen; though with growing Chinese involvement in many of the industries previously dominated by South Korea (particularly electronics), more data may become available to enable analysis. It is for this reason that this book examines precisely Taiwan, Japan, India, and the US, with some attention toward the EU in the wake of its increasingly competitive posture toward China. Taiwan Contemporary East Asian problems—from Pyongyang’s nuclear ambitions to Washington’s military presence in the Pacific, to the varied territorial disputes which occupy the attentions of all major capitals in the region—usually have their fons et origo in one of four major events: the Meiji Restoration of the 1860s, the Sino-Japanese War of the 1890s, the Second World War (or Second Sino-Japanese War in Chinese historiography), and finally the Korean War. With the One China problem, we have an issue whose origins are creditable to all four major turning points. As a consequence of losing the first Sino-Japanese War (1894–1895), China was forced to hand over to the emerging Japanese Empire an island some 110 miles off its coast known as Taiwan (and referred to as “Formosa” by Japan), as a concession. This was a transformative period in

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world affairs, and still, more transformative times were ahead. In the midst of a civil war that came on the heels of the fall of the Qing Dynasty (1911) between the Kuomintang Party-run government of the Republic of China and the 1921-formed Communist Party of China (with the People’s Liberation Army, founded in 1927, as its military wing), Japan decided to annex the northeast of mainland China in 1931—though some debate rages as to whether this was an invasion of “China” (as a unitary entity) or of “Manchuria” as its own de facto independent entity, as the central government had a very limited reach in the northeast of China, which was run by numerous military cliques (warlord groupings) at the time (Kissinger 2012: 88). Nevertheless, both the Kuomintang government and the Communists interpreted this as an act of invasion and ceased hostilities and formed an alliance against Japan. On December 7, 1941, the Japanese attacked Pearl Harbour, thereby dragging the US into the world conflict. This marked the opening of the Pacific front of World War II, which culminated in the Hiroshima and Nagasaki nuclear attacks that resulted in the surrender of Japan and an effective end of the war in 1945. With the common enemy gone, the Kuomintang and the Communists once again resumed their fighting for sole control of China. The end for the Kuomintang finally came on October 1, 1949 with victory for the Communists and the declaration of the People’s Republic of China (PRC). In some sense, however, this marked a new beginning for the Kuomintang, as massive numbers among them, and particularly their leadership in the person of Chiang Kai-shek fled to the island of Taiwan. A planned invasion by the Communists was repelled by the presence of the US, a firm ally to the anti-Communist Kuomintang. Persistently, the Kuomintang proclaimed itself as still being the government of all Chinese peoples on both the island as well as on the mainland and still ruling what they proclaimed as the “Republic of China” from the island of Taiwan. The PRC claimed the same. Thus both entities claimed to be the “One China” and began a process of competing for recognition among states in the international community. Bräutigam (2009: 22) observes that “while China has frequently emphasized the principle of non-interference in internal affairs, the ‘One China Policy’ has remained the prominent exception to the rule. The absence of diplomatic ties with Taiwan is a precondition for any fruitful diplomatic relations with Beijing.” Extreme measures have also been taken, as “numerous historical examples have shown that diplomatic ties are cut off and economic aid is suspended if a country establishes diplomatic ties with Taiwan.”

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Initially, the US and its allies recognized Taiwan (whose leader had been a signatory to the UN Charter), as did a number of other states in the world, including some African states. A major shift came in 1971 when an Albania-initiated United Nations General Assembly resolution (Resolution 1668) to replace the ROC (which will be referred to as “Taiwan” for the remainder of the chapter) with the PRC (which will be referred to as “China” for the remainder of the chapter) as the representative of China passed. Over the subsequent five decades, Taiwan has shed allies and recognizers (though the US remains an important military backer with no official recognition since 1979) and presently only has 17 formal diplomatic relations in the world, and only 1 in the African continent (the Kingdom of eSwatini, formerly known as Swaziland). Since 2000, African countries have overwhelmingly recognized China as opposed to Taiwan including Liberia, Chad, Senegal, the Gambia, São Tomé and Príncipe, Burkina Faso, and, as studied here, Malawi. Beijing has reportedly made overtures to eSwatini. Interestingly, many of these states were initially reached out to either through the platform of the Forum on China–Africa Cooperation (FOCAC), or reportedly by promises of foreign aid as well as, for the conflict-ridden countries (e.g., Liberia and Chad), assistance through the UN Security Council, where China obtained a permanent seat in 1971. This went against the expectations of at least one scholar who had seen a twenty-first century setting favorable to Taiwan and observed that “many smaller nations side with the ROC (also a small nation) saying that its sovereignty should be protected against a larger aggressive nation. More important, they support the idea of selfdetermination and apply that principle to Taiwan” (Copper 1997: 225). It is important to note, the contrast between the relative stagnation of the Taiwanese economy (growing by only 2.16% per year between 2007 and 2018) and the enormous growth of Chinese economy (growing by an average of 8.78% per year between 2007 and 2018). Furthermore, China’s seriousness about reincorporating Taiwan has been on display recently with China’s President Xi Jinping issuing on January 2, 2019 a statement to Taiwan’s leaders which called for peaceful unification, but made it clear that “China reserved the option of using force if Taiwan didn’t go along.”

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India and Japan The Maritime Silk Road is China’s most ambitious initiative in history. Popularly known as One Belt and One Road (OBOR), this infrastructure project of gigantic proportions is an attempt by Beijing to bring under its sway more than 60 countries, from Scandinavia to the South Pacific islands, in its land and maritime versions (Madhav 2017). In a world of competing economic and trade alliances, OBOR has overtaken many others active in the region and beyond. By all means, this is singularly the biggest constellation of nations in the twenty-first century. But one prominent nation is missing in this mega show: India. And that is no coincidence. To counter OBOR, some scholars claim (Nair 2017), India and Japan proposed the Asia–Africa Growth Corridor (AAGC). The two governments launched the initiative during the 52nd annual general meetings of the African Development Bank (AfDB) held in Gujarati’s capital of Gandhijinagar on May 24, 2017, with the hope that the project would be “a cheaper option and have a smaller carbon footprint when compared to China’s One Belt, One Road (OBOR) initiative” (Nair 2017). On May 25th, the two nations jointly presented a vision document for the project “that is largely meant to propel growth and investment in Africa, by curtailing the ever-increasing presence of the Chinese on the continent” (Nair 2017). The AAGC is an attempt to create a “free and open IndoPacific region” by rediscovering and creating new sea corridors that will link the African continent with India and countries in the South Asia and South East Asia sub-regions as well as Oceania through both public and private efforts, with joint ventures and consortia to take up infrastructure, power and agribusiness projects in Africa. Already Bangladesh, Myanmar, Cambodia, Laos, Indonesia, Singapore, and Australia are on board and on the African side, Mozambique, Kenya, Djibouti, and BRICS member South Africa have expressed interest with plans being made to connect ports in Jamnagar, India with Djibouti in the Gulf of Aden (Nair 2017). Additionally, ports of Mombasa and Zanzibar will be connected to ports near Mudarai; Calcutta will be linked to the Sittwe port in Myanmar. India is also developing ports under the Sagarmala program specifically for this purpose. Does this signify a direct riposte toward China? An “alternative to the Chinese alternative order” as it were? To begin with, the plan grew out of a November 2016 meeting between Indian Prime Minister Narendra

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Modi and Japanese Prime Minister Shinzo Abe (Times of India 2017). Furthermore, that India would choose to partner up with China’s traditional rival is perhaps a response to China’s own decision to prioritize its cooperation with India’s own traditional enemy in the region, Pakistan. This is discussed further below. The China–Pakistan Economic Corridor (CPEC) constitutes one of the largest foreign investments China has made in the framework of the OBOR initiative. The expenditures planned for the coming years in the amount of approximately $46-billion will further intensify relations between China and Pakistan as well as provide Beijing with access to the Arabian Sea, increasing its trade access to Europe, the Middle East, and Africa. At the same time, Pakistan will assume a more prominent role in China’s foreign policy. But CPEC also affects relations between India and Pakistan. The corridor runs through the region of Gilgit-Baltistan (GB) in northern Pakistan. This region belongs to Jammu and Kashmir, to which both India and Pakistan have asserted claims. Since the accession of the former princely state to the Indian Union in October 1947, India has claimed the entire area for India and insists on resolving the dispute only with Islamabad. India invokes the 1972 Shimla Agreement, according to which disputes between the two countries are to be resolved through bilateral negotiation. Pakistan, in contrast, invokes a series of resolutions on Kashmir in the United Nations and views the former princely state as disputed territory whose final status must be put to a referendum. The Kashmir dispute has been the cause of three of the four wars that India and Pakistan have waged against each other since 1947. “China, by being aware of these sensitive and still to be concluded spots and averting them has essentially both undermined India, a fellow BRICS ally, and at the same time interfered in the Indo-Pak relationship on the side of Pakistan” (Wagner 2016: 2); that in the Indo-Pakistani wars of 1965 and 1971, China took the side of Pakistan against India is still not forgotten in New Delhi and these recent moves refresh such memories. Further, China’s friendship with Pakistan is particularly interpreted negatively in India as Pakistan and India have been at odds with one another with India claiming that the Pakistani military dresses its troops in civilian clothing so that they can conduct “terrorist” attacks on India. But while India has been unequivocal in condemning terror outfits and identified Pakistan as the biggest source of terrorism, China has defended Pakistan at every single forum. China has blocked India’s attempt at the UN for sanctions against Jash-e-Mohammad chief Masood

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Azhar. India has been campaigning for sanction against Masood Azar, who has allegedly masterminded several terror attacks in India. Lack of cooperation from China is therefore taken with offense in New Delhi. Territorial Disputes Since 1962, there have been numerous border incidences between the Indian and Chinese militaries; Nathu La in 1967 and Sumdrong Chu two decades later. Over the decades since the 1993 agreement, there have been hundreds of similar face-offs between Chinese and Indian troops, none of which has led to a single bullet being fired. In the recent past too, the Depsang Plateau and the Chumar Demchok area witnessed face-offs in April 2013 and September 2014, respectively, with the latter occurring at the same time as President Xi Jinping’s visit to India (Incidentally, the Chinese incursion in Bhutan happened around the time of Prime Minister Modi’s visit to the US). The Doklam face-off was triggered when a team of the People’s Liberation Army (PLA) was prevented by Indian troops from extending a class-5 track in the Doklam Plateau area which is part of Bhutanese territory. The Indian Army acted in response to a request from the Royal Bhutan Army under the terms of the 2007 Bilateral Friendship Treaty. Moreover, the PLA’s track building is in contravention of the 2012 Agreement between the Special Representatives of India and China, whereby the status quo was required to be maintained in the said area until the resolution of the tri-junction in consultation with Bhutan. On June 18th, two days after construction began, 270 Indian soldiers with weapons and bulldozers entered Doklam to stop the Chinese troops from constructing the road. On 24th July, the Chinese foreign minister doubled down stating that India knows the territory belongs to China. Soon thereafter, however, the US entered the fray on the Bhutanese-Indian side with India further asserting that its retreat would be predicated on a Chinese retreat. On August 28th, both sides withdrew their forces. India is not the only state with whom China has a territorial dispute. There are hang-ups with Japan too. At the root of the dispute are 8 “uninhabited islands and rocks in the East China Sea.”16 These islands 16 BBC, ‘How Uninhabited Islands Soured China-Japan Ties,’ BBC, November 10, 2014. Available at: https://www.bbc.com/news/world-asia-pacific-11341139 (Last accessed: 2 November 2019).

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measure a total of seven square kilometers, and straddle the north-east shores of Taiwan, the eastern coast of the PRC, and the south-west of Japan’s southern Okinawa prefecture. The islands are presently administered by the Japanese government. “They matter because they are close to important shipping lanes, offer rich fishing grounds and lie near potential oil and gas reserves. They are also in a strategically significant position” (BBC 2014; November 10). This is significant because of the growing competition between the US and China for supremacy in the region. Japan and China have different bases of claim to the territory. Japan says it surveyed the islands for 10 years in the 19th Century and determined that they were uninhabited. On 14 January 1895 Japan erected a sovereignty marker and formally incorporated the islands into Japanese territory. After World War Two, Japan renounced claims to a number of territories and islands including Taiwan in the 1951 Treaty of San Francisco. These islands, however, came under US trusteeship and were returned to Japan in 1971 under the Okinawa reversion deal. Japan says China raised no objections to the San Francisco deal. And it says that it is only since the 1970s, when the issue of oil resources in the area emerged, that Chinese and Taiwanese authorities began pressing their claims. (BBC 2014; November 10)

On the other hand, China says that the islands have been part of its territory since ancient times, serving as important fishing grounds administered by the province of Taiwan. Taiwan was ceded to Japan in the Treaty of Shimonoseki in 1895, after the Sino-Japanese war. When Taiwan was returned in the Treaty of San Francisco, China says the islands should have been returned too. Beijing says Taiwan’s Kuomintang leader Chiang Kai-shek did not raise the issue, even when the islands were named in the later Okinawa reversion deal, because he depended on the US for support. (BBC 2014; November 10)

For its part, in consistency with its claim to being the one China, Taiwan makes a separate claim to the islands. The US has not been a neutral arbiter it was perhaps envisioned to be when it was granted trustee status over the islands, as in February 2017, “after repeatedly questioning defence pacts, the US president signed off on a joint statement with

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Shinzo Abe…that reaffirms US commitment to defend Japan through nuclear and conventional military capabilities.”17 The United States The above stance is not surprising given that “strategic competition between China and the United States as two major political and economic powers in Asia–Pacific, and alongside rapid military expansion in Southeast Asia indicates the importance of the region in world politics” (Roudgar 2017: 1). As Roudgar (2017) states, “the conflicting security due to different kinds of national and economic interests of regional and global scale have brought a maritime disputes and resource conflicts in the crucial area that emerged tensions in the South and East China Sea” (Roudgar 2017: 1). Yet the relationship has not imploded. In fact, since the 1970s, they have been each other’s most important relationship. By 2017, two-way trade had reached US$635.36-billion, with Chinese exports to China totalling 505.47 billion, while US exports to China were at US$129.89-billion. This growing deficit, peaking at US$375.58-billion in 2017, has not been unnoticed in Washington, however. Prompting a trade war, the two countries have embarked on a trade war, initiated by the Trump administration in March of 2018 (Fig. 2.2). The instrument of choice—tariffs—is interesting. Tariffs, in theory, make US-made products cheaper than imported ones, and encourage consumers to buy American-made products. China imposes retaliatory measures in early April on a range of US products, stoking concerns of a trade war between two of the world’s largest economies. The trade war is also telling for another reason; it betrays an interdependency that still makes the option of conventional conflict unthinkable. The US and China have not come close to blows since 1999, however. In May of that year, in the midst of the Kosovo War, “at what was otherwise a high point of US-China relations,” in a B-2 bomber that was released from Missouri, bombarded and destroyed the Chinese Embassy in Belgrade (Kissinger 2012: 477). China’s president at the time, Jiang Zemin spoke of this as a “deliberate provocation” by the Americans (Kissinger 2012: 477). As he 17 Al Jazeera, ‘Trump Assures Abe over Disputed East China Sea islands,’ Al Jazeera, February 10, 2017. Available at: https://www.aljazeera.com/news/2017/02/ trump-assures-abe-disputed-east-china-sea-islands-170210201048825.html (Last accessed: 2 November 2019).

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Tariffs (in millions of US$)

300 250 200 150

US tariffs on PRC PRC tariffs on US

100 50 0

Fig. 2.2 Retaliatory tariffs between China and the US, Q1 2019

put it, partly pressured by the popular protests within his population, “the great People’s Republic of China will never be bullied, the great Chinese nation will never be humiliated, and the great Chinese people will never be conquered” (Kissinger 2012: 477). Nevertheless, American diplomatic efforts worked to diffuse what might have otherwise proved a cause for war; “as soon as Secretary of State Madeleine Albright was informed, she asked the Deputy Chairman of the Joint Chiefs of Staff to accompany her to the Chinese Embassy in Washington, though it was the middle of the night, to express the regrets of the US government” (Kissinger 2012: 477). In return, Jiang likewise sought to use his domestic audience “to restrain his public” (Kissinger 2012: 477). Former US Secretary of State Henry Kissinger observes that this is “a pattern similar to that of American Presidents on the human rights issue” (Kissinger 2012: 477). It would appear, then, that despite some bold assertions of “a collision course for war” between the two states (Allison 2017: vii),18 the two countries, like China has done in many of the difficult bilateral relationships, have proven adept at agreeing to disagree, at least for the time being.

18 Allison’s semi-deterministic argument is based on this assumption: “Intentions aside, when a rising power threatens to displace a ruling power, the resulting structural stress makes a violent clash the rule, not the exception” (Allison 2017: xv).

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Prospects: Agreeing to Disagree? In December 1996, when Jiang visited Pakistan following a trip to India, he made a very significant statement before the Pakistan National Assembly. Speaking to Pakistani lawmakers, Jiang advised Pakistan to adopt the India–China template in their dealings with New Delhi and not let contentious issues come in the way of the development of their relationship on other fronts, particularly trade and business, and peopleto-people ties. “If certain issues cannot be resolved for the time being, they may be shelved temporarily so that they will not affect the normal state-to-state relations,” Jiang said (Dawn 2010; italics added). The salience of this point has been revitalized time and time again in China’s various relationships. While any progress on the border issue was probably symbolic (the two remain unable to even agree on the Line of Actual Control (LAC) between their two armies), China is much more interested in making significant investments in India (Dawn 2010). This was in spite of the fact that the number of face-offs is now steadily rising. Up to July of 2017 the number of transgressions is about 300 as compared to only about 200 the previous year. It is likely to cross 500 by the end of the year. Nevertheless, border disputes have never been cause for China to cease trade relations. China has border disputes with most of its neighbors. Over the years, it has resolved territorial disputes with Afghanistan, Kazakhstan, Myanmar, Pakistan, Russia, and Tajikistan. At present, its biggest border dispute is with India and Bhutan to some extent but apart from the land and territorial borders, China also shares maritime borders with four major countries—Japan, South Korea, Vietnam, and the Philippines (The Times of India 2017)—with whom continued trade in the face of military incursions is owed to the fact that there is a wide berth between the military and commerce as well as between the semi-private sector (state-owned enterprises) and the military; further, the rising frequency of border incursions is perhaps due to a disconnect between the sometimes autonomous top-brass in the People’s Liberation Army and the politicians in Beijing.

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Regional Responsibility and Trade—The Other Achilles’ Heels? As of 2015, there has been a slow-down in China’s economic growth, and Beijing is anxious to avoid any major distraction from preventing the restoration of its economy and therefore reach its projected aim of a moderately prosperous society by 2049, as well as fund its OBOR grand plan. India’s reluctance for conflict with China also revolves around the economical state of affairs in the country. China’s keenness for a partnership with India is because demography is its Achilles’ heel, with the Chinese population aging at an unprecedented pace. China’s working age population peaked in 2012, the median age will rise rather abruptly to 49 by 2050, and with national debt at 300 percent of GDP it has only a small window to achieve the ‘national dream’ of becoming rich before getting old. In contrast, India’s working age population will increase till 2050, enabling higher growth rates and eventually overtaking the United States in terms of GDP. (Sanwal 2017)

For India, the fundamental question is that it cannot be a $10-trillion economy without integration into the growing Asian market and benefiting from Chinese investment, given the rise of protectionism in the US (Sanwal 2017). Additionally, both the Indian and Chinese governments of recognize that “their relations are a factor of stability” in a “multipolar world, and at a time of global instability” and that “differences should not become disputes”; China’s official news agency Xinhua later called for the ancient civilizations to become “cooperative partners,” “develop complementary industries and cooperate in protecting common security” for “achieving the dream of an Asian century” (Sanwal 2017: 1). Thus the India–China strategic convergence will need recognition of the Asian century composed of two nodes. This is true of the other countries in the region, whose economic interdependence with China is detailed in Fig. 2.3. In terms of exports, the order of dependency ranges from 40% (Taiwan), to 9.02 (India), with the US also having 8% of its exports destined for China. In terms of exports, the range is 25.8% (Japan) and 19.1% (Taiwan), with the US also at 21.4% of its imports coming from China. Apart from interdependence, war is also made unlikely by prudential pacificism at the behest of nuclear capabilities of China, India, and the US.

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50 40

40 25.8

30 20

19.1

9.02

10

21.4

17.18

17.1

8

0 Taiwan

Japan

India

US

Share of China and Hong Kong, SAR in total exports (in %) Share of China and Hong Kong, SAR in total imports (in %)

Fig. 2.3 Asia–Pacific countries’ trade interdependence with China, 2017 (Source World Trade Organization [2017a] and US Census Bureau [2019]19 )

The Nuclear Factor “The first Chinese nuclear test, coming two years after India’s defeat in the 1962 Sino-Indian conflict, precipitated the Indian nuclear weapons program, which in turn first demonstrated its capacity in 1974” (Tellis 2015: 2). New Delhi responded to the Chinese challenge with additional nuclear tests and in 1998 declared itself to be a nuclear weapon state, and began to overtly develop its nuclear deterrent aimed at both China and Pakistan. India today is believed to possess an arsenal of some 100 nuclear weapons, though this figure is highly uncertain. The country is thought to have produced close to 600 kilograms of weapons-grade plutonium, though it is unclear whether all this material has been machined into warheads. “The total size of the Chinese nuclear weapons inventory today is widely believed to consist of some 250 nuclear warheads, but the accuracy of these or any other numbers is debatable. China has a substantial fissile material stockpile consisting of some 16 metric tons of highly enriched uranium and some 1.8 metric tons of weapon-grade plutonium, so there are no practical constraints on its ability to produce an arsenal of any size it chooses. Given the choices China makes in regard to delivery 19 WTO, ‘Japan’ (2017). Available at: http://stat.wto.org/CountryProfile/WSDBCo

untryPFView.aspx?Language=S&Country=JP (Last accessed: 18 November 2019); WTO, ‘Chinese Taipei’ (2017). Available at: (Last accessed: 18 November 2019); WTO, ‘India’ (2017). Available at: (Last accessed: 18 November 2019). US Census Bureau, ‘Trade in Goods with World, Seasonally Adjusted’ (2019). Available at: (Last accessed: 18 November 2019).

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systems, it could deploy anywhere up to an additional 150 warheads over the next ten years” (Tellis 2015: 2). China, which in 2016 vetoed India’s membership to the Nuclear Supplier’s Group of nations, did not oppose India’s civilian nuclear deal with the US, but has on occasion argued for the same kind of nuclear exceptionalism to Pakistan, which the US allowed for India. As both states are nuclear power states, the likelihood of a large-scale war is further reduced due to the notion of nuclear deterrence which holds that no war between two nuclear states is likely as they both are likely to engage in prudential pacifism for fear of the cost to be incurred in a relatively shorter period of time by the other’s nuclear strikes. Further, India’s capability, though less than that of China, is to be considered in the light of its strategic interactions with the US (Tellis 2015). This also applies to Japan and Taiwan in light of their mutual defense pacts with the US. This in turn highlights the role of coalition— or lack thereof outside of shared agreements with the US—in curtailing the prospects of conflict. The Limits of Coalition Another key factor determining the basis of this book is that China’s rivals are unlikely to coalesce. In other words, China’s rivals—particularly Japan and India—are prevented from forming a united front against China by their other priorities. To begin with, “we live in a world today driven by ‘strategic partnerships’” (Mukherjee 2018: 835). In particular, “Asian states…have formed a host of strategic partnerships, which are typically more flexible and wide-ranging than alliances” (Mukherjee 2018: 835). To be sure, Prime Minister Abe called for a “democratic security diamond” in East Asia and the Pacific, to encompass an alliance comprising of Japan, the US, India, and Australia (Mukherjee 2018: 835). There is no historical basis for the two countries, however, given that “Japan and India were estranged for much of the Cold War…and India’s non-aligned foreign policy, which tilted towards the Soviet Union” (Mukherjee 2018: 838). In particular, “Japan and India have a number of strategic partners, yet use the term ‘alliance’ exclusively in reference to their partnerships with the United States and each other” (Mukherjee 2018: 836). Despite the prima facie plausibility of a future Japan–India alliance, Mukherjee makes the case that “this will in fact not materialise” (Mukherjee 2018: 838). The reasons for this, however, are rooted in the challenges of politics and management, “not in the fact that major powers

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today prefer strategic partnerships” (Mukherjee 2018: 838). Mukherjee’s evaluation of the various facets of “a potential Japan-India alliance suggests five major conclusions” (Mukherjee 2018: 857): First, India’s adherence to a foreign policy of strategic autonomy is likely to preclude any major shift in New Delhi’s preference for strategic partnerships over alliances in world politics. Second, if an alliance were to form, it would be purely defensive and its ambit would be restricted to the threat posed by China to both countries. Japan would seek to avoid entanglements in any conflict involving Pakistan, and India would similarly seek to avoid entanglements with North Korea. Third, the alliance would be temporary, lasting only as long as China posed a threat to both countries; it would be diffuse in terms of the obligations placed on each party to defend the other; and it would link economic and security cooperation in order to remain lucrative for both countries, especially India. Forth, given the multipolar regional system and perceptions of defense dominance in the Asian theatre, the alliance would witness a high degree of buck-passing because Japan and India would see each other as individually capable of stalemating a Chinese offensive. Finally, the alliance and the process of its formation would provoke a significant backlash from China, anticipation of which is likely to preclude the alliance to begin with. (Mukherjee 2018: 857)

Relevance to Relations with South Africa The above make for globalized competition and in that way serve as the starting point of the book’s thesis; unable to fight each China in conventional war by virtue of their economic interdependence with it, the countries of Asia have had to engage in peaceable means of competition against each other. Figure 2.4 (especially read alongside Appendix A) summarizes the channels of competition necessitate competition over access to South African markets. There is additional competition to be had over the “Asian century,” a concept that is internally contested in terms of who will lead it. In many ways this is outwardly obtained (e.g., by presence in Africa—markets, security). Doubtlessly, many capitals are aware of the fact that the PRC has been “the main driver of wealth accumulation” in Asia, while some (e.g., Japan and Taiwan) have not been keeping up or have been on the decline (Allison 2017: 13). In turn, this competition is internally modulated within Africa. The states deal with African countries

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Asian geopolitical balance Within-region competition

Territorial disputes

Historic rivalries

Influence over ASEAN states

Extra-region competition

South Africa

Political alignment

Economic alignment

United Nations

Investment

African Union

Market access

Fig. 2.4 South African relevance of Asia–Pacific competition

based on each African state’s appraised comparative advantage; establish competing military installations in Djibouti and they seek markets in the comparatively middle-class South Africa.

References Allison, Graham. 2017. Destined for War: Can America and China Escape Thucydides’s Trap? Boston, MA: Houghton Mifflin Harcourt. BBC. 2014. How Uninhabited Islands Soured China-Japan Ties. BBC, November 10. Available at: https://www.bbc.com/news/world-asia-pacific11341139 (Last accessed: 2 November 2019). Bräutigam, D. 2009. The Dragon’s Gift: The Real Story of China in Africa. Oxford: Oxford University Press. Chang, Iris. 1997. The Rape of Nanking: The Forgotten Holocaust of World War II . New York: Basic Books. Copper, J.F. 1997. The Origins of Conflict Across the Taiwan Strait: The Problem of Differences in Perceptions. Journal of Contemporary China 6 (15): 199–227.

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Country Economy. 2021. Comparison: Annual GDP 1980. Country Economy. https://countryeconomy.com/gdp?year=1980. Dawn. 2010. Chinese PM Vows to Stand by Pakistan in Tough Times. Dawn, December 19. https://www.dawn.com/news/592289/chinese-pm-vows-tostand-by-pakistan-in-tough-times. Kissinger, Henry. 2012. On China. New York: Penguin. Madhav, Ram. 2017. Turning Down China. The Indian Express, May. Retrieved March 5, 2019, from http://indianexpress.com/article/opinion/columns/ turningdownchinaonebeltoneroad4659155/ (Last accessed: 14 November 2019). Ma, Josephine. 2018. There’s No Chinese ‘Debt Trap’, Says Myanmar Minister, as Government Pushes for Joint Port Project to Go Ahead. South China Morning Post, June 30. Available at: https://www.scmp.com/news/china/ diplomacy-defence/article/2153210/myanmar-minister-dismisses-chinesedebt-trap-fears-over (Last accessed: 12 November 2019). Mukherjee, Rohan. 2018. Japan’s Strategic Outreach to India and the Prospects of a Japan–India Alliance. International Affairs 94 (4): 835–859. Nair, Avinash. 2017. To Counter OBOR, India and Japan Propose Asia-Africa Sea Corridor. The Indian Express, May 31, pp. 1–2. Roudgar, Iraj. 2017. The Strategic Competition in Southeast Asia. Journal of Defense Studies and Resource Management 5 (1). https://doi.org/10.4172/ 2324-9315.1000132. Sanwal, Mukul. 2017. A New Equilibrium with China: Near Simultaneous Rise of Neighbours Is Not Unprecedented in Asia. Institute for Defence Studies and Analyses, Retrieved March 12, 2019, from http://www.idsa.in/idsaco mments/anewequilibriumwithchina_sanwal_250817?q=print/ (Last accessed: 5 March 2019). SCO. 2002. SCO Charter. Shanghai Cooperation Organisation. https://treaties. un.org/Pages/showDetails.aspx?objid=08000002803594e2. Stiles, Matt. 2018. Upset Over a U.S. Missile Defense System, China Hits South Korea Where It Hurts—In the Wallet. LA Times, February 28. Retreived February 17, 2022, from https://www.latimes.com/world/asia/la-fg-chinasouth-korea-tourism-20180228-htmlstory.html. Strait Times. 2019. China Pledges $800m in Aid to Cambodia. Strait Times, January 23. Available at: https://www.straitstimes.com/asia/se-asia/chinapledges-800m-in-aid-to-cambodia (Last accessed: 12 November 2019). Sun, Jing. 2017. Growing Diplomacy, Retreating Diplomats – How the Chinese Foreign Ministry has been Marginalized in Foreign Policymaking. Journal of Contemporary China 26 (105): 419–433.

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Tellis, Ashley J. 2015. China, India, And Pakistan—Growing Nuclear Capabilities With No End in Sight. Carnegie Endowment for International Peace. https://carnegieendowment.org/2015/02/25/china-indiaand-pakistan-growing-nuclear-capabilities-with-no-end-in-sight-pub-59184. The Times of India. 2017. Asia-Africa Growth Corridor Launched. The Times of India, May. Retrieved March 3, 2019, from https://timesofindia.indiatimes. com/city/ahmedabad/asia-africa-growth-corridor-launched/articleshow/588 30900.cms (Last accessed: 14 November 2019). United States Census Bureau. 2019. Trade in Goods with World, Seasonally Adjusted. Available at: https://www.census.gov/foreign-trade/balance/ c0004.html (Last accessed: 18 November 2019). Wagner, Christian. 2016. The Effects of the China-Pakistan Economic Corridor on India-Pakistan Relations. (SWP Comment, 25/2016). Berlin: Stiftung Wissenschaft und Politik -SWP- Deutsches Institut für Internationale Politik und Sicherheit. World Bank. 2019. Manufacturing, Value Added (Annual % Growth)—South Africa. World Bank. Available at: https://data.worldbank.org/indicator/NV. IND.MANF.KD.ZG?locations=ZA (Last accessed: 11 November 2019). World Trade Organization. 2017a. Chinese Taipei. Available at: http:// stat.wto.org/CountryProfile/WSDBCountryPFView.aspx?Country=TW (Last accessed: 18 November 2019). World Trade Organization. 2017b. India. Available at: http://stat.wto.org/ CountryProfile/WSDBCountryPFView.aspx?Country=IN&Language=F (Last accessed: 18 November 2019). World Trade Organization. 2017c. Japan. Available at: http://stat.wto.org/ CountryProfile/WSDBCountryPFView.aspx?Language=S&Country=JP (Last accessed: 18 November 2019). Zhang, Yongjin. 2013. The Tribute System. Oxford Bibliographies, April 22. Available at: https://www.oxfordbibliographies.com/view/document/ obo-9780199920082/obo-9780199920082-0069.xml (Last accessed: 6 November 2019). Zhou, T. 2019. A Blend of “Hard” and “Soft” Assistance: China’s Aid to Cambodia. In South-South Cooperation and Chinese Foreign Aid, ed. M. Huang, X. Xu, and X. Mao, 95–112. Singapore: Palgrave Macmillan.

CHAPTER 3

Taiwan: The International Political Economy of the One China Policy

Unlike in the twentieth century, between 2000 and 2018 no African state switched its recognition from the People’s Republic of China (PRC) to the Republic of China/Taiwan (ROC); but seven switched in the opposite direction. In academic literature and popular media, this has been seen as a marker of China’s ‘victory’ over the ROC in the present millennium.1 But one of the biggest victories for the PRC took place in the late twentieth century, with the formal switching of South Africa, then the continent’s largest economy by GDP, in 1998. Economics was arguably at the core of this switch—or has at least subsequently become a measuring rod of the depths of the relationship. This is indicated by foreign direct investment (FDI) and trade in both directions. Much contemporary analytical focus has been on the much smaller South Africa’s attractiveness to the PRC in looking at what sustains the relationship. This overlooks, however, the early history and (as the chapter seeks to find out) the contemporary workings of the relationship wherein much of the discourse was on the PRC’s attractiveness to post-apartheid South Africa who had to choose to recognize either Mainland China or Taiwan. The central 1 Ben Blanchard, ‘China Wins Back Burkina Faso, Urges Taiwan’s Last African Ally to Follow,’ Reuters, May 26, 2018. Available at: https://www.reuters.com/article/uschina-burkina/china-wins-back-burkina-faso-urges-taiwans-last-african-ally-to-follow-idU SKCN1IR09W (Last accessed: 6 March 2019).

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_3

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feature in South Africa’s decision-making was the impending return of Hong Kong, with whom South Africa had strong trade relations, to Chinese control as a special administrative region (SAR) in 1997. Evidently, the subsequent trade between South Africa and PRC compared to South Africa and the ROC has clearly grown considerably. But three caveats are important in this regard. Firstly, it is worth asking the extent to which this growth has been seen in post-switch imports to South Africa, compared to South African exports to China; in other words, there is a need to unbundle “trade” in terms of exports and imports and assess the level of growth seen in South Africa’s exports to the PRC. Secondly, there is a need to unbundle “China” and look at South Africa’s trade relations with Hong Kong in particular to assess the extent to which, against the backdrop of the decline of Hong Kong’s economy after reincorporation to China (from 20% to less than 3%), the switch to China for the sake of maintaining trade relations with Hong Kong has seen pay-offs for South Africa. Thirdly, Taiwan remains a trading partner (and especially an export destination) for South Africa. This scenario, therefore, offers the basis for a follow-up study and lends itself perfectly to an ex-post analysis to test out South Africa’s policy motivation, and its subsequent effectiveness in a horizontal study. This chapter conducted such a test to the following hypothesis: Growth in South African imports to Hong Kong have, on a year-on-year average between 2001 and 2017, outweighed South African imports to the Republic of China.

The chapter tested this hypothesis with data for the 2001–2017 period. The findings suggest that in the early half of the 17-year period, exports to Taiwan continued to outweigh those to Hong Kong, while those to Hong Kong observed continued growth and outgrew those to Taiwan by an average of 2.56% per year, and a comparative growth of 40.91% for the entire period vis-à-vis Taiwan. Thus, on the face of it, we can deduce that South Africa’s decision to switch to the PRC, insofar as it was predicated on the need to maintain access to Hong Kong, was rational. Beyond Hong Kong, access to China has also been a major factor in South Africa’s trade relations and in making the switch “worth it.” For its part, Mainland China’s outgrowing of Taiwan in importance as an export market for South Africa is evident in that its exports to Mainland China between 2001 and 2017 outgrew those to the former by 13.64% per year and by

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218.28% overall. South Africa’s exports to Mainland China between 2001 and 2017, grew by 25.18% per year on average, and 403.03% overall. Between 2001 and 2008, the exports grew by an average of 42.65% per year, and 298.58% overall. Further the raw volumes themselves far outweigh those to Taiwan and Hong Kong itself. Thus, it appears that access to the Mainland seems to have justified the switch in the pre2011 context, which was when Hong Kong finally overtook Taiwan in the ranking of export markets. This following section of the chapter will conduct a literature review, noting scholarship on South Africa’s interaction with the Hong Kong– Taiwan–China nexus. Subsequent to this, the chapter will detail the methodology to be used, and apply it in the fourth section of the chapter to deduce its results. The chapter will then analyze the findings made from the data, and then conclude with a discussion of the importance of the findings and opportunities for further research emanating from them.

3.1

Background

By the telling of leaders on both sides, the One China problem is the central focus of China and Taiwan’s foreign policies. Proposals for reunification put out starting in the 1980s by Beijing have suggested that the island would be reunited with the mainland and enjoy special autonomous status, including its own army (Kissinger 2012: 471). Taiwanese response to this has been consistent rejections, for reasons of pragmatism and principle (Lee 1999). Over the past number of decades, however, the island has been conducting dialogue as well as trading with and investing in the mainland’s economic transformation. The net effect of this has been Taiwan becoming increasingly economically intertwined with the mainland (Kissinger 2012: 471): Following the loosening of restrictions on bilateral trade and investment in the late 1980s, many Taiwanese companies shifted production to the mainland. By the end of 1993, Taiwan had surpassed Japan to become the second-largest source of overseas investment in China. (Kissinger 2012: 471)

In the 1980s and 1990s, there were also significant political changes taking place within Taiwan itself. The year 1987 saw the lifting of political bans in Taiwan, while 1994 saw a constitutional amendment that

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laid the framework for the direct election of the Taiwanese President by universal suffrage. In 1988, Lee Teng-hui had been elected Chairman of the Nationalist Party. Leading up to the 1996 election he embarked on what is termed “vacation diplomacy” by visiting world capitals, during which he attended meetings of international organizations, and then maneuvered to be received “with as many of the formal trappings of statehood as possible” (Kissinger 2012: 472). In 1995 Lee sought to visit the US under the guise of visiting his alma mater, Cornell University, for a class reunion. He found approval from a new Speaker of the House of Representatives, Newt Gingrich, eager to make political impact. The House of Representatives voted almost unanimously, minus one, to allow Lee’s visit. This garnered pressure from the PRC, and soon “the administration reversed itself and granted the request for a personal and unofficial visit” (Kissinger 2012: 473; emphasis added). But once at Cornell University, the Taiwanese president “delivered a speech straining the definition of “unofficial” (Kissinger 2012: 473). Indeed, “Lee’s elliptical phrasings, frequent references to his ‘country’ and ‘nation,’ and blunt discussions of the imminent demise of communism all exceeded Beijing’s tolerance” (Kissinger 2012: 473). In response the PRC recalled its ambassador from Washington, DC and scrapped official contacts with the American government (Kissinger 2012: 473). Then—as in the Taiwan Strait crises of 1950s—China initiated military exercises and multiple missile tests off its south-eastern coast into the Taiwan Strait. These actions were theatrical both politically and militarily. Indeed that China used dummy warheads was read as strong indication that the exercise was primarily symbolic (Kissinger 2012: 474). With US and Chinese agreement, a way forward was arrived at: A solution of sorts was found when Secretary of State Christopher and the Chinese Foreign Minister met on the occasion of an ASEAN meeting in Brunei, obviating the need of determining who had made the first move. Secretary Christopher conveyed an assurance – including a still classified presidential letter defining American intentions – regarding visits by Taiwanese senior officials and an invitation for a meeting of Jiang with the President. (Kissinger 2012: 475)

In October of 1995, Clinton elected to meet president Jiang in New York instead of the capital, as a visit in Washington “by a Chinese President in

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the aftermath of Chinese military exercises in the Taiwan Strait” was guaranteed to garner a hostile reception (Kissinger 2012: 476). Nothing much came of this meeting, which took place alongside a series of UN meetings. Matters came to a further boil due to the pending Taiwanese election and what the outcome might mean was Lee re-elected.2 December 2 of that year was the eve of parliamentary elections in Taiwan. Chinese exercises took place once again in the east coast province of Fujian. In March 1996, China’s army declared a further round of negotiations immediately before the Taiwanese elections. With the election approaching, “missile tests ‘bracketing’ Taiwan hit points just off key port cities in the island’s northeast and southwest” (Kissinger 2012: 476). Within Taiwan, there were only “few signs of panic” (Rigger 1999: 175). The US intervened on behalf of its ally: The United States responded with the most significant American show of force directed at China since the 1971 rapprochement, sending two aircraft carrier battle groups with the carrier Nimitz to Taiwan Strait on the pretext of avoid “bad weather.” At the same time, walking a narrow passage, Washington assured China that it was not changing its one China policy and warned Taiwan not to engage in provocative acts. (Kissinger 2012: 477)

Both China and the US recoiled, and “in the wake of the crisis, relations between China and the United States improved markedly” (Kissinger 2012: 477). On the other hand, the actions of China had the united consequence of increasing Lee’s chances of winning the election by some 5 points, and he won the election by an outright majority of 54% instead of the plurality he might otherwise have obtained (Rigger 1999: 176). As soon as the election passed, so too did the cross-strait crisis. Nevertheless, vigorous competition between the mainland and Taiwan for global recognition continued in the 1990s. One of the key victories for China was a gain in recognition by the newly installed democratic government of South Africa. The role of economics in this switch, and the subsequent growth and sustenance of the relationship is explored below. 2 “Beijing issued numerous warnings in the months leading up to the election, urging the Taiwanese people to reject Lee Teng-hui and his ‘splittist’ agenda” (Rigger 1999: 175). Beijing further “reiterated its threat to use military force if Taiwan sought independence” (Rigger 1999: 175). See: Rigger, Shelley, Politics in Taiwan: Voting for Democracy (New York: Routledge, 1999).

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3.2 South Africa Between China and Taiwan: A Review South Africa’s linkages with China are evident in the economic, in diasporic, as well as political-strategic terms in the global arena. From 2018 data, China remains South Africa’s principal import partner, a position it has occupied since 2009 and is likewise South Africa’s principal export partner.3 South Africa imports from China include electronics, textiles, and other processed manufactured goods.4 China’s imports from South Africa do include some portion of manufactured goods (which were valued at US$22.09-million in 2018), but the mainstay of Chinese imports from South Africa are raw materials and minerals including iron ores, iron ore agglomerates, manganese, copper, and wool.5 Against this backdrop, some observers note that “Beijing has come to regard South Africa as the continent’s mineralogical treasure house, the world’s largest producer of platinum, and substantial reserves of important industrial minerals.”6 In addition to this trade, the relations are also defined by the close political association between the two countries and their governing parties. The rapid development in these relations is made more evident by an assessment of the broader history from which they emerged; along with the centrality of Hong Kong and Taiwan in that history. For all intents and purposes, South Africa had no relations with Mainland China after 1948 when the country adopted Apartheid as a legislative framework. Its anti-China stance was probably hardened in the subsequent year when 3 Daniel Workman, ‘Top South African Trading Partners,’ World’s Top Exports, February 4, 2019. Available at: http://www.worldstopexports.com/top-south-african-import-par tners/ (Last accessed: 5 March 2019). 4 MIT Observatory of Economic Complexity, ‘What Does South Africa Import from China?,’ MIT Observatory of Economic Complexity, 2016. Available at: https://atlas.media.mit.edu/en/visualize/tree_map/sitc/import/zaf/chn/show/ 2016/ (Last accessed: 5 March 2019). 5 MIT Observatory of Economic Complexity, ‘What Does South Africa Export to China?,’ MIT Observatory of Economic Complexity, 2016. Available at: https://atlas. media.mit.edu/en/visualize/tree_map/sitc/export/zaf/chn/show/2016/ (Last accessed: 5 March 2019). 6 David Monyae and Gibson Banda, ‘Sino-South African Relations at Twenty: Key Lessons,’ UJCI Africa-China Occasional Paper Series 5, 2018, p. 2. Available at: http://confucius-institute.joburg/wp-content/uploads/2017/12/UJCI-Occasi onal-Paper-No-5.pdf (Last accessed: 6 March 2019).

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China became a communist People’s Republic following the defeat of the Nationalists by the Chinese Communist Party. However, the end of the Chinese Civil War in 1949 and the manner in which it ended meant that there were essentially two Chinas; one on the Mainland and the other, the Republic of China, based in the island of Taiwan. In classical Cold War politics, the countries with communist inclinations recognized the Mainland, and those in the West or Western-allied recognized Taiwan, which was also in the United Nations until being formally replaced by the Mainland in 1971. Diplomatic relations between South Africa and Taiwan were formed, first at the consular level in 1962, and were then taken up to the ambassadorial level in 1976.7 “Trade and investment as well as defense contracts grew steadily. A large number of South African military personnel were trained in the ROC. Conversely, Taiwanese firms invested heavily in South Africa, thus strengthening the economic foundation for diplomatic ties.”8 The oncoming sanctions movement against apartheid South Africa did little to impact the relations, as in the same period, despite also the prevalence of discrimination against South Africans of Chinese descent.9 At the advent of democracy in South Africa, by which time Taiwan had also democratized, the latter continued to funnel investments in the former, including over a billion and a half dollars for a factory and thereby created an estimated 40,000 jobs.10 For its part, the Mainland is widely regarded by historians as having played a part in the anti-apartheid movement in South Africa. In 1963, for example, then ANC leader Oliver Tambo paid a visit to the Chinese capital where discussions centered on support for the South African liberation struggle.11 The South African Communist Party also had some linkages with the Chinese Communist Party. But, once more under the caprice of Cold War politics, these were inconsistent. For example the Sino–Soviet dispute led to a decline in China’s interaction with the ANC 7 Garth Le Pere and Garth Shelton, China, Africa and South Africa: South-South Cooperation in a Global Era (Pretoria: Institute for Global Dialogue), 2007, p. 20. 8 Monyae and Banda, ‘Sino-South African Relations,’ p. 12. 9 Monyae and Banda, ‘Sino-South African Relations,’ p. 3. 10 Monyae and Banda, ‘Sino-South African Relations,’ p. 4. 11 Susan Booysen, ‘Hues of the ANC’s Chinese Homecoming,’ Daily Maverick, August 1, 2018. Available at: https://www.dailymaverick.co.za/opinionista/2018-08-01-hues-ofthe-ancs-chinese-homecoming/ (Last accessed: 3 March 2019).

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and the SACP, resulting in greater CCP support for the PAC.12 Ian Taylor observes that: Sino-Soviet tensions meant that Beijing was effectively barred from involving itself in the international relations of the main liberation group — the African National Congress (ANC) — from the mid-1960s until the end of the 1980s and instead found itself supporting the largely ineffective Pan-Africanist Congress (PAC). Beijing was thus unable to play a major part in the liberation struggle in South Africa…Support was largely confined to rhetorical exhortations and condemnatory denunciations of Pretoria.13

For Shelton similarly, “Beijing’s full support for the liberation of South Africa was never in doubt.”14 Taylor, however, notes that China had a lot to gain through this appearance of solidarity with the anti-apartheid struggle; primarily, at the time, in ascending to the United Nations General Assembly, and taking over the permanent membership in the Security Council. Essentially, China was able to pose as a concerned member of the developing world and also gain prestige from its reflected glory in being seen to aid the oppressed in Africa. At a time when China was excluded from the United Nations by the Republic of China, and when the African vote was increasingly important in the same institution, the tactical aim of winning African support to replace Taipei cannot be dismissed. Involvement in the liberation campaign in the 1960s hence was not simply selfless internationalism on the part of Beijing.15

In November 1996 the South African government decided to derecognize the Republic of China in favor of China. The decision took effect at the end of 1997 and was preceded by intense debate within South Africa. In keeping with the One China policy, Beijing had provided

12 Shelton, ‘Hong Kong,’ p. 8. 13 Ian Taylor, ‘The Ambiguous Commitment: The People’s Republic of China and the

Anti-Apartheid Struggle in South Africa,’ Journal of Contemporary African Studies, 18:1 (2000), pp. 91–106. 14 Shelton, ‘Hong Kong,’ p. 8. 15 Ian Taylor, ‘The Ambiguous Commitment,’ p. 93.

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the compromise by offering full diplomatic relations and no objection to full economic (but not political) relations with Taiwan. South Africa’s endorsement of the “one China” principle opened the way for full diplomatic interaction with China while maintaining (and potentially expanding) economic links with Taiwan.16 Williams and Hurst argue that “the ROC and PRC were far from passive bystanders” in the first four years of democracy as Pretoria was choosing which China to recognize. Taipei put forward incentives to the ANC and then the post-1994 government more directly. These were explicitly designed to sway Pretoria to retain its recognition of Taiwan (Williams and Hurst 2018: 559).17 And as Beijing grew impatient with South Africa, the PRC’s policymakers “made it increasingly clear to their counterparts in Pretoria that if South Africa continued to defer its decision on the two Chinas there would be negative implications for its relationship with the PRC” (Williams and Hurst 2018: 561). The importance of the use of incentives is further demonstrated in the fact that Mandela’s 1993 trip to the ROC had been to fundraise. Observe Williams and Hurst: “the focus of Mandela’s trip to the ROC in late July 1993 was fundraising.”18 And a few days before Mandela’s visit, ANC and ROC officials arranged that “US $10 million […] be given to the President [Mandela] during his courtesy call at the President’s [Lee Teng-Hui] office at 18h00 just before dinner on Friday, July 31.” In an interview with Williams and Hurst (2018) an ANC official noted the following: “The Question of further assistance, whether hard cash or in kind, should be raised during the President’s courtesy calls to both the President’s and the Prime Minister’s offices—and not at the public events, (i.e. at dinner tables). We understand that the Western way of fundraising, such as passing the hat and asking for contributions from individuals/business people in public is something that is not done here—they get very embarrassed.”19 Among the crucial determinants in South Africa’s decision to recognize the PRC over the PRC was Hong Kong. The Hong Kong link meant 16 Shelton, ‘Hong Kong,’ p. 9. 17 Christopher Williams and Claire Hurst, ‘Caught Between Two Chinas: Assessing

South Africa’s Switch from Taipei to Beijing,’ South African Historical Journal, 70:3 (2018), pp. 559–602. 18 Williams and Hurst, ‘Caught Between Two Chinas,’ p. 561. 19 Williams and Hurst, ‘Caught Between Two Chinas,’ p. 570.

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that South Africa could develop commercial, and later diplomatic, relations with China.20 Further, South Africa’s relationship with Hong Kong under British control was productive and positive, little affected by the political revolution in China after October 1949. As Les Labuschagne, former Head of Mission in China, observed: China has the might, muscle, and meanness to close our Hong Kong Consulate and clamp down on other private sector commercial activities. It would seem as if the velvet glove covering the iron fist is wearing thin and I interpret the oblique message as an indirect indication that China is not prepared to lose face over the South African issue.21

Furthermore, although trade between the ROC and South Africa was at the time larger than that between the PRC and South Africa, the combined trade figures of Hong Kong and PRC far outweighed those of the ROC.22 This “Hong Kong Factor” became a central issue within the South African government. According to the erstwhile Deputy Minister of Foreign Affairs Aziz Pahad: “Hong Kong was always our argument… we used to say the reality is not just now Mainland but also Hong Kong, at that time we had very strong economic and other relations. And that was exactly why the timing was brought in.”23 Other switches in recognition by African countries between the “two Chinas” which have taken place since the year 2000 have only been onedirectional: toward Beijing. This would seem to vindicate the economic argument. Indeed, South Africa has since sought to make the most of its access to Hong Kong, as “a number of South African companies remain very active in Hong Kong, which is ideally suited to building commercial links with China, given its well-developed legal framework, business-friendly policies and use of English as the language of business. A major attraction is the availability of high-quality English-speaking graduates with a knowledge of Chinese business culture and traditions.”24

20 Shelton, ‘Hong Kong,’ pp. 9–10. 21 In Williams and Hurst, ‘Caught Between Two Chinas,’ p. 13. 22 Williams and Hurst, ‘Caught Between Two Chinas,’ p. 13; see also Monyae and

Banda, ‘Sino-South African Relations,’ p. 2. 23 Williams and Hurst, ‘Caught Between Two Chinas,’ p. 21. 24 Shelton, ‘Hong Kong,’ p. 11.

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After some twenty years since the switch took effect, it is worth asking whether the “Hong Kong factor” was of much weight, and whether, in effect, South Africa’s switch was not necessary insofar as it wanted to maintain and grow its commercial access to Hong Kong, and indeed to China itself. After all, following the retrieval of Hong Kong from the British, Beijing has undertaken to keep Hong Kong’s capitalist system and lifestyle ‘unchanged’ for 50 years. Both the Sino–British Joint Declaration and the Basic Law guarantee the continuation in Hong Kong of the ‘one country, two systems’ model and ‘a high-level of autonomy’. The Basic Law provides for a political system called the Hong Kong Special Administrative Region.25

In its dealings with Taiwan, China itself has traditionally proved pragmatic: “The debate on independence, or unification for Taiwan, is downplayed, focusing rather on economic integration that would bring significant and tangible benefits to all participants.”26 The Chinese companies have also continued to trade with and invest in states that did not recognize the PRC. For example, there was, before the 2018 switch, trade with and investment in Burkina Faso, through other countries in the West African region and the ECOWAS (Economic Community of West African States) framework (Cabestan 2017).27 In light of this, it is not inconceivable that it would have also gone to greater lengths to get access to the much larger, middle-income South African market while the latter continued to have relations with Taiwan. As discussed, there has been major growth between South Africa and China’s commercial links. However, for the purposes of examining the rationality of the decision to switch from Taiwan to China, it is important to unbundle “trade” and examine, in particular, the movement in South African exports to Hong Kong. The present study is, therefore, a follow-up to this stance. This scenario lends itself perfectly to an ex-post analysis and will allow the chapter to 25 Shelton, ‘Hong Kong,’ p. 6. 26 Shelton, ‘Hong Kong,’ p. 7. 27 Jean-Pierre Cabestan, ‘Burkina Faso: Between Taiwan’s Active Public Diplomacy and

China’s Business Attractiveness,’ South African Journal of International Affairs, 23:4 (2017), pp. 495–519.

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test out the congruence or lack thereof between a policy’s motivation and its subsequent effectiveness. It basically asks whether South Africa’s exports to Hong Kong (excluding China) have subsequently grown to the extent of outweighing those to Taiwan, especially since that was implied in Pretoria’s rationale for switching. This is followed up by an analysis of the economic gains made from recognizing the Mainland, which otherwise would have been forfeited from having economic but not diplomatic relations with it. In other words, in light of comparative (vis-à-vis China) Taiwan (and even Hong Kong itself), what further access to the Chinese market has been made by South Africa that would have otherwise been abdicated by not recognizing China? The methodology applied is detailed in the following section.

3.3

Methodology

The central research question which this chapter seeks to answer is conjoined to the hypothesis which this chapter seeks to test: did South Africa’s exports to Hong Kong (excluding China) subsequently grow to the extent of outweighing those to Taiwan? Thus, this chapter tests the following hypothesis: Growth in South African imports to Hong Kong have, on a year-on-year average between 2001 and 2017, outweighed South African imports to the Republic of China.

Tied into this is a threshold test such that the overall proportion of South Africa’s exports to Hong Kong must outweigh those to Taiwan in raw figures, as well as in the averaged mean for the period for the hypothesis to be vindicated. The variables are operationalized as follows. The independent variable (IV) is operationalized as South Africa’s exclusive recognition of the PRC. On the other hand, the dependent variable (DV) is operationalized as subsequent trade volumes, FDI and aid in US$. The following method of comparison is applied: a combination of cross-case and over-time comparison. The method of inquiry will require the chapter to work out both the total comparative figures and the overall rate of growth and rate of decline of the two markets for South Africa.

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Results

There are a number of comprehensive data sources that have the necessary trade data points for the timeframe of the study. The data is sourced from the Trade Map database, which is from the WTO and UN-managed International Trade Centre (ITC); the data was corroborated with the Massachusetts Institute of Technology’s Observatory of Economic Complexity (OEC). The raw data in Table 3.1 tracks South Africa’s exports to Taiwan and to Hong Kong in the 2001–2017 period in raw US dollar terms. The data depicts exports to Taiwan beginning from a higher base of US$453.925-million to Hong Kong’s US$322.258-million, and by the end of the data a shift to these ranking, with exports to Hong Kong weighing more than those to Taiwan—at US$1, 643.327-million and US$871.275-million, respectively. Thus there is observable growth Table 3.1 South African exports to the ROC, and to Hong Kong, SAR

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total SA exports to the ROC (in US$ millions)

Total SA exports to Hong Kong, SAR (in US$ millions)

453.925 485.7 661.392 1367.822 785.440 591.749 890.893 1138.775 822.250 1059.592 1198.664 1037.559 1144.840 865.041 576.031 455.286 871.275

322.258 316.107 423.214 528.109 587.181 399.889 655.460 645.113 963.425 965.549 1244.587 1440.866 1443.893 1893.817 1775.595 1766.414 1643.327

Source TradeMap (2019b, c), https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c% 7c344%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c490%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2% 7c1%7c1%7c1%7c1

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in both countries from their initial base. But it is worth exploring the pace and point at which Hong Kongese imports of South African goods surpassed those of Taiwan. The initial point of exports to Hong Kong surpassing exports to Taiwan is clearly 2009, wherein they totaled US$963.425, while those to Taiwan totaled US$822.250. However, the order was re-reversed in the following year, 2010, when once more Taiwanese imports of South African goods (at US$1059.592-million) surpassed those to Hong Kong (at US$965.549). However, Hong Kong regained its comparative ranking in as the greater importer of South African goods in 2011. The ranking has remained unchanged for the rest of the dataset (i.e., until 2017). Now we turn to the pace at which exports to the two countries moved, as well as the consistent growth or decline they observed both before and after the point of Hong Kong’s initial surpassing of Taiwan. For that, we have to convert the data into annualized movements in growth or decline on an annual basis. This is done in Table 3.2 and represented in Fig. 3.1. Table 3.2 and Fig. 3.1, which compare the two countries both with themselves and with each other, depict South African exports to Hong Kong and Taiwan in percentage form. None of the countries saw uninterrupted growth in the period, with Taiwan registering two years of decline, whereas Hong Kong observed three years of decline in the 2001–2008 period. Importantly, the year wherein Hong Kong surpassed Taiwan as the principal exporter between the two was also a year wherein Taiwanese exports declined, by themselves, by −27.79% on a year-on-year basis, while those to Hong Kong grew by 49.34 compared to 2008 (Table 3.3). On a yearly basis, however, the period saw greater growth in ROC imports of South African products than did Hong Kong; with the two countries registering a total of 23.01 and 14.10% respectively in averaged annual terms. Overall, however, due to the tendency of South African exports to Taiwan to decline by steeper amounts (a total of 67.23% in 2005–2006 alone, compared to Hong Kong’s 35.36% in 2002, 2006, and 2018), as well as the fact that Hong Kong began from a lower base, Hong Kongese imports of South African goods far outgrew those to Taiwan. They registered a growth of 98.39% while those to Taiwan registered only 14.05%. However, as noted above, in raw terms they had still been outranked by those to Taiwan. On account of this, the chapter now turns to assess the overall 2001–2017 period, inclusive of both the pre- and post-2009 periods.

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Table 3.2 Averaged movement in South African exports to the ROC, and to Hong Kong, SAR

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total year-on-year movement in SA exports to the ROC (in %)

Total year-on-year movement in SA exports to Hong Kong, SAR (in %)

7.0 36.17 106.80 −42.57 −24.66 50.55 27.82 −27.79 28.86 13.12 −13.44 10.33 −24.44 −33.40 −20.96 91.36

−1.90 33.88 24.78 11.18 −31.89 63.91 −1.57 49.34 0.22 28.89 0.21 31.16 31.16 −6.24 −0.51 −6.96

Source TradeMap (2019b, c), https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c% 7c344%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c490%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2% 7c1%7c1%7c1%7c1

In the converted data for the entire period in Table 3.4, we deduce that the exports to Hong Kong far outgrew those to Taiwan by an average of 2.56% (i.e., the difference between 14.10 and 11.54% for the two destinations) per year, whereas they outgrew them by 40. 91% (i.e., the difference between 225.66% and 184.75%) for the entire 2001–2017 period. Thus, on the face of it, we can deduce that South Africa’s decision to switch to the PRC, insofar as it was predicated on the need to maintain access to Hong Kong, was vindicated. However, as exports to Taiwan continued to grow, and Hong Kong’s surpassing of Taiwanese imports in raw terms took time to materialize, it is worth assessing other (purely economic) factors which, at least in the interim, sustained and justified South Africa’s political recognition of Mainland China and not Taiwan. This is done below.

Fig. 3.1 Annual growth and decline in South African exports to the ROC and Hong Kong, SAR, 2002–2017 (Source TradeMap [2019b, c], https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c344%7c%7cTOTAL%7c% 7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c% 7c490%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author)

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Table 3.3 Averaged scores of South African exports to the ROC, and to Hong Kong, SAR, 2001–2008

ROC HK, SAR

83

Mean scores, 2001–2008

8-year total, 2001–2008

23.01 14.10

14.05 98.39

Source TradeMap (2019b, c), https://www.trademap.org/Bilateral_ TS.aspx?nvpm=1%7c710%7c%7c344%7c%7cTOTAL%7c%7c%7c2% 7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c490%7c%7cTOTAL% 7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

Table 3.4 Averaged scores of South African exports to the ROC, and to Hong Kong, SAR, 2001–2017

ROC HK, SAR

Mean scores, 2001–2017

16-year total, 2001–2017

11.54 14.10

184.75 225.66

Source TradeMap (2019b, c), https://www.trademap.org/Bilateral_ TS.aspx?nvpm=1%7c710%7c%7c344%7c%7cTOTAL%7c%7c%7c2% 7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c490%7c%7cTOTAL% 7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

3.5

Analysis

In terms of the hypothesis, the chapter has made findings to the contrary; in other words, it is not correct that growth in South African imports to Hong Kong have, on a year-on-year average between 2001 and 2017, outweighed South African imports to the Republic of China. Findings to the contrary were made in 2002, 2006, 2008, and 2017 when declines in South African exports to Hong Kong took place, while those to Taiwan grew. There were also coincidences of mutual decline in 2015 and 2016. Considering this, and the fact that much of the decline took place in the pre-2009 period when the opportunity cost for dropping relations would have been lower, the continuation of South Africa’s relations with Mainland China poses a bit of a small puzzle. Any answer to the puzzle necessitates a look directly at Mainland China itself. The pre-2006 period, when South African exports to the Mainland finally surpassed exports to the ROC, further complicates the puzzle as

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Table 3.5 Total South African exports to the PRC, 2001–2017

Total SA exports to the PRC (in US$ millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

461.312 450.298 889.148 1055.746 1368.724 2108.757 4169.608 4309.780 5670.123 8095.827 12,495.814 10,320.514 12,047.236 8770.890 7420.282 6812.081 8666.175

Source TradeMap (2019a), https://www.trademap.org/Bilateral_ TS.aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2% 7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c

South Africa maintained relations with a China that was exporting less from it than the other. This requires an answer of an aggregate variety. As Williams and Hurst recount on the rationale for switching: Although trade between the ROC and South Africa was at the time larger than that between the PRC and South Africa, the combined trade figures of Hong Kong and PRC far outweighed those of the ROC.28

This would have been evident to the policymakers who would have already noted, as Shelton (who in this incidence does not offer a breakdown between imports and exports) details, that in the 1994–2003 period, South Africa’s trade with Asia had seen an 86.9% growth vis-àvis Hong Kong, and greater growth vis-à-vis Taiwan, who had seen a 116.1% growth. As Table 3.5 shows, South African exports to Taiwan were finally outweighed by those to Mainland China by themselves only

28 Williams and Hurst, ‘Caught Between Two Chinas,’ p. 13.

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in 2006 when they registered a raw figure of US$2108.757-million to the former’s US$591.749-millions. The comparison to Taiwan further demonstrates Mainland China’s outgrowing of Taiwan. South Africa’s exports to Mainland China between 2001 and 2017, grew by 25.18% per year on average, and 403.03% overall; comparatively, they outgrew those to Taiwan by 13.64% per year and by 218.28% overall. Between 2001 and 2008, the exports grew by an average of 42.65% per year, and 298.58% overall. Further the raw volumes themselves far outweigh those to Taiwan and Hong Kong itself. Thus, it appears that access to the mainland seems to have justified the switch in the pre-2009 context (Table 3.6). They could also be maintaining their retention in the context of a decline of Hong Kong itself after reincorporation to China which has seen it move from accounting for 20% of China’s total GDP to less than Table 3.6 Annualized statistical movement in South African exports to the PRC, 2002–2017

Years

Percentage change

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

−2.38 97.45 18.73 29.64 54.06 97.72 3.36 31.56 42.78 54.34 −17.40 16.73 −27.19 −15.39 −8.19 27.21

Source TradeMap (2019a), https://www.trademap.org/Bilateral_ TS.aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2% 7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c. Calculations by author

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3% by 2017.29 “Moreover, Beijing is supporting and promoting a number of other Chinese cities as gateways, regional hubs and entry points into the Chinese mainland market. This suggests that Hong Kong needs to be more efficient, more forward-looking and more competitive than ever before to maintain its position.”30 Indeed, as “over the longer term Hong Kong’s attractiveness as a gateway to China is undermined,” South Africa has begun to “look at other ways of accessing the Chinese market.”31 Hitherto, among the principal disadvantages of South Africa’s Hong Kong Consulate has been the presence of “the political limitation of the Consul General in the region”; especially given that Hong Kong is a special administrative region, “South Africa’s diplomats stationed there cannot undertake official activities in southern, or central China. The Hong Kong Consulate is thus restricted to advancing political and economic relations within the HKSAR only.”32 In light of this, and in light of Hong Kong’s decline, access to China, premised on having relations with the PRC, has been a premium. Indeed, “some European countries have opened consulates in Chengdu to support commerce in central and western China…within the next decade Hong Kong will find it increasingly difficult to maintain its role as intermediary with the Mainland.”33 Similarly, a number of South African firms have begun setting up operations and site offices in the Mainland, especially in Beijing, Shanghai and a number of the new cities such as Guangzhou and Shenzhen. Over time, some South African businesses have come to see Beijing, over Hong Kong, “as the ‘political gateway’ to China” and thusly the most suited place to have operations in.34

29 Yue Wang, ‘Twenty Years After the Handover, Is Hong Kong Losing Its Shine in China?,’ Forbes, June 29, 2017. Available at: https://www.forbes.com/sites/ywang/ 2017/06/29/twenty-years-after-the-handover-is-hong-kong-losing-its-shine-in-china/# 3eb9c77857c7 (Last accessed: 7 March 2019). 30 Monyae and Banda, ‘Sino-South Africa Relations,’ p. 12. 31 Shelton, ‘Hong Kong,’ p. 19. 32 Shelton, ‘Hong Kong,’ p. 19. 33 Shelton, ‘Hong Kong,’ p. 20. 34 Shelton, ‘Hong Kong,’ p. 20.

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3.6

87

Conclusion

The decision of South Africa to recognize the Mainland at the expense of its relations with Taiwan, ostensibly to maintain its export access to Hong Kong, being returned to China by Britain as a special administrative region, offers a rare case of assessing the rationality and effectiveness of a policy on an ex-post basis. This chapter conducted such a study by comparing the rate of growth in South African exports to the two entities, Hong Kong and Taiwan between 2001 and 2017, in an attempt to gauge whether the decision to formulate relations with China so as to maintain access to Hong Kong has resulted in a “pay off” for Pretoria. In the raw and statistical data for the entire period, we deduce that exports to Hong Kong outgrew those to Taiwan by an average of 2.56% per year, and a comparative growth of 40.91% for the entire period vis-à-vis Taiwan. Thus, on the face of it, we can deduce that South Africa’s decision to switch to the PRC, insofar as it was predicated on the need to maintain access to Hong Kong, yielded gain and avoided a potential opportunity cost. Further, Mainland China’s outgrowing of Taiwan in importance as an export market for South Africa is evident in that its exports to Mainland China between 2001 and 2017 outgrew those to the former by 13.64% per year and by 218.28% overall. Therefore the decision to switch from Taiwan to Mainland China saw pay-offs on two fronts—Hong Kong and Mainland China overtook Taiwan as major export partners. It should be noted, however, that until 2006 Taiwan was still a bigger export market than the PRC, and outranked Hong Kong until 2009 and then again in 2010 and has been outranked since 2011. We can therefore surmise that until 2006 trade volumes to Hong Kong alone were not what justified the switch, but rather the combined figures of exports to both Hong Kong and the PRC. In light of this, it can be concluded that while access to Hong Kong was the principal justification for switching to the PRC, it has been the PRC itself, in light of the relative economic slowdown in both Hong Kong and Taiwan vis-à-vis the Mainland, which has subsequently justified the switch. South Africa’s recognition of China therefore falls within the tradition of numerous other states in the international arena who affected switches to the PRC for pragmatic purposes, and for gaining entry into the Chinese market. While it could be argued that South Africa would have had trade relations with China regardless of its lack of diplomatic relations with the country, as it currently does with Taiwan, one more factor matters: as a major import partner as well

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(which Taiwan is not), it has proved important for South Africa to have political channels to make use of when it comes to raising commercial disputes, along with negotiating, though not necessarily always successfully, for increased reciprocal access to China’s market. This is especially important when, as we have seen, Hong Kong has become somewhat less consequential in the totality of China’s economy—presently accounting for 3% of the Chinese GDP as opposed to its 1997 levels of 20%—with the commercial rise of new cities, such as Shenzhen and Guangdong, in China itself which South African firms are making headway and seeking further access.

References Cabestan, Jean-Pierre. 2017. Burkina Faso: Between Taiwan’s Active Public Diplomacy and China’s Business Attractiveness. South African Journal of International Affairs 23 (4): 495–519. Lee, Teng-hui. 1999. The Road to Democracy: Taiwan’s Pursuit of Identity. Tokyo: PHP Institute. Kissinger, Henry. 2012. On China. New York: Penguin. Rigger, Shelley. 1999. Politics in Taiwan. New York: Routledge. TradeMap. 2019a. South Africa’s Exports to China. TradeMap. Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c156% 7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Last accessed 7 Mar 2019. TradeMap. 2019b. South Africa’s Exports to Hong Kong, China. TradeMap. Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1% 7c710%7c%7c344%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1% 7c1%7c1%7c1. Last accessed 7 Mar 2019. TradeMap. 2019c. South Africa’s Exports to Taipei, China. TradeMap. Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c% 7c490%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Last accessed 7 Mar 2019. Williams, Christopher, and Claire Hurst. 2018. Caught Between Two Chinas: Assessing South Africa’s Switch from Taipei to Beijing. South African Historical Journal 70 (3): 559–602.

CHAPTER 4

Japan: Economically Hot, Politically Cold

4.1

Introduction

The period between 2000 and 2007 saw an exponential increase in China–Africa economic ties, which have subsequently grown in the decade since. These economic relations were especially heightened after the 2008 financial crisis. Overall, China–Africa trade grew by an average of 20% per year to US$188-billion in the period between 2007 and 2017, with imports and exports more or less growing at the same pace, while Chinese FDI into Africa grew by 40%, to approximately US$32billion in the same timeframe. On the other hand, Japan was hard hit by the crisis, with economic growth declining in 2008, 2009, and 2011, and reaching virtual stagnation in their entire period; growing only by 0.66% while China grew by 8.78% in the same timeframe. Further, a litany of literature argues that due to historical and geostrategic reasons, the two countries are engaged in a state of competition with one another. Moreover, China is argued to be ahead of Japan, despite the latter having formed TICAD (Tokyo International Conference on African Development) about a decade prior to the former’s FOCAC (Forum on China–Africa Cooperation). Both countries are arguably instrumentalizing their aid tethers to gain access to the African countries’ resources,

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_4

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as well as access to their import markets in somewhat of a zero-sum game. On the basis of this literature, the present chapter postulated the following hypothesis: increases in PRC imports of the given products in the given year(s) always correlate with decreases in Japanese imports of the same products in the same recipient country. Specifically, the following hypotheses were tested: H1 All increases in PRC exports to the given country co-occur with decreases in Japanese exports of the given product in the given year(s); H2 No decreases in PRC and Japanese exports of the given product(s) to the given country in any given year(s) can mutually occur. The findings of the chapter point to the lack of a general replacement of Japan by the PRC in vehicle exports in the period between 2007 and 2017. There was, however, a total surpassing of Japan by the PRC in this period in all three countries of non-vehicle exports; ceramic products in South Africa (from 2009), iron and steel imports in Kenya (from 2015) and construction equipment in Uganda (from 2012). None of these were reversed by 2017. In the timeframe, the Japanese exports of these products have manifested some volatile patterns, with growths and declines, whereas the PRC has largely consistently grown. This means that on a year-on-year basis, there may be instances of mutual growth of Japanese imports to the countries with those of China, but on the decade-long timeframe, there has been an overall surpassing of Japan by the PRC in these three non-vehicle products, which had originally been dominated by Japan. Further, China not only overtook Japan in what were import sectors dominated by it in these countries, it also developed a differential market in which it is increasingly growing which forms its third most critical import into Kenya especially, but in which Japan has virtually no import activity; locomotives and rail. The first section of the chapter will give a brief literature review, surveying the body of work on the effects, outcomes and dynamics of Japanese and Chinese relations with the continent of Africa, and some of the literature which has emerged arguing that the two countries are engaged in competition for influence at each other’s expense. The second section will give an account of the methodology to be used in the chapter, along with a description of the dataset. The third will give an analysis of the data. The chapter will subsequently note some conclusions which can be reached on the basis of the data analyzed.

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91

Background

Japan’s relations with China, “the rapidly emerging power just offshore…were often characterised as economically hot, but politically cold, while the United States, Japan’s long-standing security guarantor, was bogged down – and distracted by – wars in the Middle East” (Samuels and Wallace 2018: 703). Thus in recent years, many Japanese strategists have increasingly “questioned how long they could count on China for their nation’s prosperity and on Washington for credible commitment to Japan’s defence and provision of regional stability” (Samuels and Wallace 2018: 703). In many ways, then, The future seems suddenly to have arrived on the Japanese doorstep. It is hard to ignore, after all, the fact that balance of power in north-east Asia has shifted dramatically in a very short period. In 2005, Japan’s GDP was roughly twice that of China; but by 2015 China’s GDP had grown to more than two and a half times that of Japan. (Samuels and Wallace 2018: 704)

Despite Japan’s GDP per capita being more than four times that of China, “sharply divergent economic growth rates impinged directly on Japanese security” (Samuels and Wallace 2018: 704). One indicator worries Japan most; comparative military expenditure. In step with its economic expansion, China’s military budgets grew in real terms by 650 percent between 1996 and 2016, to some US$143 billion. Japan’s defence budget, in contrast, grew less than 20 percent in real terms over the same period and in 2017 was less than one-third of China’s. (Samuels and Wallace 2018: 704)

Even in the wake of an exponential defense budget increase to Tokyo’s largest ever, in 2018, the country was still behind China as it was still underfunding core defense systems, “including destroyers, jet fighters, and transport aircraft – underfunded” (Samuels and Wallace 2018: 704). Despite the long-standing mutual defense pact with Washington, there have recently been attempts for strategic autonomy. Moreover, Japanese concerns about the United States are not solely an outgrowth of Trump’s election. Discussion of regional and global power transitions and the erosion of US primacy has been part of Japan’s elite discourse for well over a decade. (Samuels and Wallace 2018: 704)

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In the preceding decade, “Japanese strategists began to wonder openly how long the United States, its population of foreign wars and operating under fiscal constraints, would continue to be willing and able to maintain its commitments to Japan” (Samuels and Wallace 2018: 704). This view has traditionally been affiliated with the conservative elite and foreign policy circles but has in the past decade “attracted broader support among the pragmatic mainstream” (Samuels and Wallace 2018: 707). In this regard, “The biggest challenge to ‘business as usual’ derives from the increasingly positive attitude in Japan towards what the country can do for itself without relying on Washington or awaiting for the United States to make demands” (Samuels and Wallace 2018: 707). The Japanese has long realized that “China is gaining economic power rapidly and is translating this into military and diplomatic influence” (Samuels and Wallace 2018: 704). One frontier in which this has taken place is Africa. The workings of this, how it has played itself out, and what it has meant for the South Africa–China relationship are detailed in the following section, before the chapter turns to outlining the methodology and then assessing the data findings.

4.3 Literature Review: China and Japan’s Relations with Africa Within Japan, many acknowledge that role of China as a key player in Japan’s economic rebound in the ten-year period since the 2008/9 global recession. But “with China’s growing economy overtaking Japan’s in size in 2010, its rising military strength, and its deepening relations with other states, they increasingly view China as a competitor” (Chung 2012: 88). Moreover, Africa is seen as one site of contestation. As with China, Japan’s relations with Africa did not merely emerge after World War II, but rather date as far back as the nineteenth century following a decision to set up in the Cape by a subsidiary of the Japanese trading company Mikado Shokai, thereby inaugurating it is a small but significant exporter of textiles for Japanese consumers (Ampiah 2011: 269). But in the contemporary sense, Japan initiated its economic relations with African countries in the post-war era, and in the process even attempted to enroll the British as the presiding, albeit declining, colonial power in Japan’s African countries of interest, especially Ghana (the Gold Coast) and Nigeria (Ampiah 2011: 269). Indeed, Ampiah (2011) notes that “both the Nobusuke Kishi and the Hayato Ikeda administrations of

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1957–1960 and 1960–1964, respectively, were keen to further Japan’s relations with sub-Saharan Africa.” Japan’s involvement in sub-Saharan Africa properly took off and “became more than cursory” after 1965 following the initiation of an Official Development Assistance (ODA) program aimed at the sub-region (Cornelissen 1998: 7; Kim 2012: 256). The relations were not without some friction, however. For example, there was a tiff between Ghana and Japan that was caused by the “burgeoning trade imbalance” leaning toward Japan’s favor (Ampiah 2011: 269). There were similar trade-related issues between Japan and Nigeria throughout the 1960s. By 1961, Japan was far ahead of its major competitors in the textile trade in Nigeria. The huge balance of payment in Japan’s favour as a result of the lopsided trade relations led to the invocation of GATT Article 35 against Tokyo. Japan’s response to the ban on imports from Tokyo was the offer of a £10 mn loan aid to Lagos, not realising what problems this might cause. The loan was interpreted as tied aid by Lagos, which generated further tensions between the two countries, forcing Japan to send a fifteen-man delegation to Nigeria in 1965 in an attempt to bring closure to the situation. (Ampiah 2011: 287)

These issues did not preclude, however, Japan’s development of an economic policy toward sub-Saharan Africa. The primary focus of this was to secure minerals as well as a consumer market in the continent. Loans were extended by Japan to Uganda, Kenya, Nigeria, and Tanzania and later Ghana (Cornelissen 1998: 7). “Importantly, these early disbursals were made in response to the strict import restrictions on Japanese goods by these countries — countries with whom Japan had built up sizeable trade surpluses at that time” (Cornelissen 1998: 8). Therefore, this ODA from Japan could be portrayed as a kind of “political quid pro quo” (Cornelissen 1998: 8). For context, these disbursals were somewhat minor—in the early 1970s, these totaled around less than 2% of Japan’s total ODA, with most of it concentrated in Southeast Asia (Cornelissen 1998: 8). By the mid-1990s, however, the Japanese aid machinery “had become well settled in sub-Saharan Africa: by 1995 Japan was disbursing aid to all of the 47 sub-Saharan African states, and it was the top donor for seven of these countries (Kenya, Ghana, the Gambia, Malawi, Sierra Leone, Tanzania, and Zambia)” (Cornelissen 1998: 8). In the 1990s the Japanese government took its Africa policy to a new level through the formation of the TICAD process with the goal to “drive

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to draw the region into a system of enhanced trade and investment” (Cornelissen 1998: 12). But by the dawn of the 2000s, another country was also working on a similarly ambitious and continent-wide platform of economic engagement; China. Beijing established the FOCAC in 2000, to much speculation that it was doing so with the aim of replicating what Japan had done in order to surpass it. Japanese and Chinese governmental initiatives in Africa since the 1990s – specifically Japan’s TICAD process and China’s more recent Forum on China-Africa Cooperation (FOCAC) summits – have cast a spotlight on the nature of Japanese and Chinese interests and objectives in Africa. In particular, the rapid increase in volumes of Chinese trade , aid and investment in Africa, in addition to a greater physical presence of Chinese residents in Africa, alongside an increase in awareness and popularity of China amongst African countries, are seen to be eclipsing Japan’s position in Africa. (Rose 2012: 219)

Indeed, China’s advance into Africa, especially since the early 2000s, has relatively overtook Japan’s activities on the African continent. To be sure, Japan’s two-way trade with Africa grew twofold from 2001 to 2009 and reached US$34.3-billion in 2008. However, the global economic crisis greatly undermined these gains and by nearly reducing them by 50% in 2009. However, the trade figure grew once again, to US$24-billion in 2010 (still around US$10.3-billion short of its previous reach). This number appears thin in comparison to China’s own two-way trade with the continent, “which grew exponentially in the same period, and by 2010 had reached nearly US$127 billion” (Rose 2012: 220–221). Perhaps expectedly, the speed with which China has advanced in Africa has led to arguments in the literature and in popular media that these two countries (along with the US and the European Union) are locked in a rivalry for access to “resources, power and influence in Africa,” and that Tokyo has been trying to play “catch up” with Beijing (Rose 2012: 219). Argues Davies (2008: 56): If the Taiwan factor is discounted in China’s foreign policy toward the [African] continent, it is being replaced by growing strategic competition between China and Japan. In similar fashion to the China–Taiwan rivalry, intra-regional Asian political issues will play themselves out in Africa. But the competition is not for recognition but rather strategic influence in the broader international community.

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As seen, in this perceived race to secure African trade and resources (the new scramble for Africa as it is sometimes labeled), Japan is seen to be lagging behind China. Davies, for example, believes that “the trend of Japan’s anxiety over China’s engagement of Africa is already clear” (Davies 2008: 57). Similarly, Lehman (2010: 3) suggests that “China’s expansion into Africa clearly worries the Japanese government since China clearly challenges Japan’s previous dominance as the Asian model.” But Japan has not been inactive. As seen in Chapter 2, with the view to counter China’s Belt and Road Initiative, Japan, with India, proposed the AAGC. This perceived competition is not confined to Africa, as it is believed that China’s economic relationship with member states of the Association of Southeast Asian Nations (ASEAN) are increasingly closer than Japan–ASEAN relations. The 2002-signed ASEAN–China Free Trade Area (ACFTA) has cut trade barriers and thereby enhanced economic relations among these countries, such that trade between China and the ASEAN countries accounted 15.2% of the latter’s total trade with external partners, while Japan, though not too far behind, still lagged at 10.5%. Thus, from its infancy, China’s free trade agreement with the ASEAN “aroused Japan’s fear of being marginalized in the region’s economy and diplomatic discourses” (Chung 2012: 90–91). This line of thought is not without its questioners, however: What Japan has been doing and what it intends to do in and for Africa must be taken not in the context of diplomatic rivalry between Japan and other actors but in the context of Japan’s willingness to fulfill its international responsibilities and hence to serve its broad and long-term national interests. (Kato 2017: 95)

Rose (2012) further questions the “strategic rivalry” school of thought, “by examining Japanese and Chinese academic studies of each other’s activities in Africa.” The overview of Japan’s China-in-Africa discourse, and China’s Japanin-Africa discourse finds that each is often embedded within a more established discourse of Sino–Japanese relations. This, in the case of Japan, sees China’s exploits in Africa as part and parcel of the ‘rise of China’, and in some cases as an integral part of the ‘China threat (to Japan)’ debate. China’s Japan-in-Africa discourse interprets Japan’s revived interest in Africa under the TICAD IV umbrella as part of Japan’s quest to

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become a great power (in the face of a rising China), and in some cases as a threat to China’s own interests (Rose 2012: 220). There appears to be less interest and anxiety in Japan about China’s activities in Africa than some assessments infer, and that, by contrast, China’s Japan-in-Africa discourse shows a greater interest in, and in some cases suspicions of, Japan’s objectives in Africa. (Rose 2012: 219)

Indeed, some argue that both are pursuing their own national interests in their dealings with Africa. Japan’s relationship with Africa is seen as being driven by its thirst for energy, markets, and political support for its pursuit of a permanent seat in the UN Security Council (Rose 2017: 95). To be sure, “China has largely similar motives – energy needs, economic growth (through an export-led strategy), political influence, and diplomatic gains in the form of recognition by the majority of African states of the PRC as the sole government of China” (Rose 2012: 221–222). This leaves some room for the validity of the competitiveness hypothesis, which this chapter intends to test. Having reviewed the literature and noted claims of competition as well as claims of complementarity between the two Asian countries on the continent, this chapter will seek to follow the work of Rose (2012) by testing out empirically, through (unlike Rose [2012]) quantitative methods, the extent to which the two countries are incompatible and in competition for market access in the continent. The methodology for doing so is unpacked below.

4.4

Methodology

The method of inquiry used in this chapter involves a “before/after” test which will see Japan’s top three imports to each country from 2007, when it was the more voluminous importer, to 2017 be compared to the movements in those of the PRC. The marginal decline or growth rate of Japan’s imports for all three will be traced along with this time series, while also being compared to that of the PRC. The purpose will be to ascertain whether or not there is a correlation wherein Japan’s imports decline as those of the PRC increase, and vice versa.

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Variables The independent variable in this study is the movement in South African and Egyptian imports of Chinese goods in what were Japan-dominated import sectors in 2007, whereas the dependent variable is the comparative imports into Kenya and South Africa between US and China, specifically decrease or increase in US imports into these countries subsequent to increases or decreases in Chinese imports into the same markets. In this way, the dependent variable is operationalized as the total annual South African/Kenyan imports as measured in US dollars in the time period. As the above description suggests, the chapter is characterized by an invariance on the independent variable, and variance on the dependent variable. The chapter therefore uses a most similar approach, in which two or more cases with similar independent variables, but may yield different outcomes (i.e., in one country there could be a reverse correlation between Japan and China’s exports into these import sectors, while in another there may be linear correlations) are studied. Additionally, within the cases there is potential for variance, particularly among the three different products (i.e., there may be reverse correlation for one to two of the products, and none for the remainder). In addition to leading to results about each of the case studies, it also ensures against bias in selection of cases. The conditions for case selection in this chapter were determined by the existence of a sector which during 2007 was dominated by Japan compared to China; in other words, these two countries were selected since they both had nominally Japan-dominated markets in the relevant import sectors as at the first year of study. Additionally, as the literature review suggested, they have both had closer political and commercial relations with Japan. The postulated causal mechanism in this study are the differentiated growth rates of Japan and China as well as China’s foreign policy in the 2000s, which has seen it increasingly trained toward Africa. The former is evinced by differential GDP growth rates of the two countries in the period, as represented in Table 4.1. The latter is seen in a number of initiatives undertaken by China which indicate at Africa’s importance to China. To begin with, China formed the Forum on China–Africa Cooperation (FOCAC), along with the growth in

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Table 4.1 The GDP growths of the PRC and Japan in the 2007–2017 period

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Totals Average

PRC GDP growth rate (in per cent)

Japan GDP growth rate (in per cent)

14.2 9.6 9.2 10.6 9.5 7.9 7.8 7.3 6.9 6.7 6.9 96.6 8.78

2.2 -1.0 -5.5 4.7 -0.5 1.4 1.6 0.4 1.4 0.9 1.7 7.3 0.66

Sources Country Economy (https://countryeconomy.com/gdp/ japan?year=2017) for data on Japan and Knoema for data on the PRC (Available at: https://knoema.com/atlas/China/Real-GDPgrowth [Last accessed: 8 December 2018]). Averages calculated by author

loans from the Chinese state-affiliated Chinese Development Bank (CDB) and the China Import–Export (Exxim) Bank. This growth in China– Africa relations is also captured in the fact that its trade relations with the countries on the continent have increasingly grown; increasing from US$10.6-billion in 2000 to US$170-billion in 2017 (McKinsey 2015; MOFCOM 2018). Further, Chinese interest in African countries has seen it eagerly pursue its One China policy on the continent, and forge relations with seven new states which had previously recognized Taiwan. These include Liberia (2003), Senegal (2005), Chad (2006), Malawi (2007), Gambia (2015), São Tomé and Príncipe (2016), and Burkina Faso (2018). These causal mechanisms, in combination, provide basis to postulate a growth in Chinese interest in the Chinese market. Further, the former points toward a potential causal pathway through which China could be poised to enact a comparative advantage vis-à-vis Japan in African markets. On the basis of this, the following hypothesis is postulated: increases in PRC imports of the given products in the given year(s) always correlate with decreases in Japanese imports. From this, we postulated two hypotheses:

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H1 All increases in PRC exports to the given country co-occur with decreases in Japanese exports of the given product in the given year(s); H2 No decreases in PRC and Japanese exports of the given product(s) to the given country in any given year(s) can mutually occur.

Caveats It is worth noting that the three products studied in this study are not the top three products which these countries import. Neither are they necessarily the top three products which these countries import from Japan or China. For South Africa, its three principal imports from China include electrical machinery and equipment (valued at US$4.048,192billion in 2017), machinery and mechanical appliances (valued at US$3.002,035-billion in 2017), and footwear (totaling US$522.948million in 2017), and from Japan commodities not elsewhere specified (valued at US$711.145-million in 2017), vehicles other than railway or tramway rolling stock, and parts and accessories thereof (valued at US$760.598-million in 2017). This product also happens to match the criteria for being studied here. The third product set included machinery, mechanical appliances, nuclear reactors, boilers; parts thereof (valued at US$608.212-million at the end of 2017). For Uganda, the three principal imports from China included electrical machinery and equipment and parts thereof (valued at US$191.442-million in 2017), machinery and mechanical appliances (valued at US$164.591-million in 2017), and iron and steel (valued at US$56.365-million in 2017) and from Japan included vehicles other than railway or tramway rolling stock, and parts and accessories thereof (valued at US$212.778-million in 2017), and machinery, mechanical appliances, nuclear reactors, boilers (valued at US$83.654million in 2017) as well as iron and steel (valued at US$51.631-million in 2017). For Kenya, the three principal imports from China include machinery and mechanical appliances (valued at US$757.301-million in 2017), electrical machinery and equipment (valued at US$633.807million in 2017), and railway and tramway locomotives (valued at US$497.147-million in 2017) and from Japan include vehicles other than railway or tramway rolling stock, and parts and accessories thereof (valued at US$513.082-million in 2017), iron and steel (valued at US$158.885million in 2017), and machinery, mechanical appliances, nuclear reactors, boilers; parts thereof (valued at US$50.606-million in 2017). Subsequent

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growths or declines for these are not the subject of study in this chapter. Rather, those studied are products which, at the first year of study (2007) were principally imported from Japan by the respective African countries, and which subsequently saw growth in Chinese imports for at least a single year in the period.

4.5

Case Study Analyses Dataset Description

The dataset is composed of imports by South Africa, Kenya, and Uganda across three import sectors which at least by 2007 were comparatively dominated by Japan, but which have subsequently seen a growing PRC import activity. The data is derived from the International Trade Centre’s Trademap whose available database currently carries import and export data for all countries in the United Nations, ranging from 2001 to 2017 at the present.1 The dataset is corroborated by the World Bank, and the various government statistical offices, in this case the South African Department of Trade and Industry, the Ugandan Ministry of Trade Industry and Cooperatives, the Kenyan Ministry of Industry, Trade and Cooperatives, the Japanese Ministry of Economy, Trade and Industry, and the Ministry of Commerce of the People’s Republic of China (MOFCOM).

1 For South African imports from Japan, see: https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c392%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1% 7c1%7c1%7c1 and for South African imports from the PRC, see: https://www.trademap. org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2%7c1% 7c1%7c1%7c2%7c1%7c1%7c1%7c1. For Kenyan imports from the Japan, see: https:// www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c404%7c%7c392%7c%7cTOTAL%7c%7c% 7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1 and for Kenyan imports from the PRC, see: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c404%7c%7c156%7c%7cT OTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1. For Ugandan imports from Japan see: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c800%7c%7c392%7c% 7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1 and for Ugandan imports from the PRC, see: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c800%7c% 7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1. All datasets last accessed: 21 February 2019.

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Country-Specific Data: South Africa In the case of South Africa, the top three Japan-dominated import markets as at the year 2007 were vehicles, ceramic products, and rubber (and articles of rubber). The respective values and their subsequent growths or declines through to the year 2017 are summarized in Tables 4.2 (vehicles) and, 4.3 (ceramic products). The comparative movement of these is analyzed below. As Table 4.2 shows, Japan’s exports of vehicles into South Africa began at a baseline of US$1,376,663, and subsequently declined for the next two years, 2008 and 2009, in a row to US$1,239,323 and US$820,299, respectively. These then grew in 2010 to US$1,207,859, and declined in 2011 to US$1,130,996 and continuously declined for 2012, 2013, 2014, 2015, and 2016, reaching a dataset low of US$655,479. In 2017, there was a rebound to US$760,598. The Japanese imports and PRC imports experienced inversely correlated growths in 2011 and 2012 with PRC imports growing while those of Japan declined in 2011 and 2012. Conversely, there was no inversely correlated growth in Japanese imports and decline in PRC imports. Mutual growth did occur however in 2017, while mutual declines did occur in 2007, 2008, 2014, 2015, and 2016. Overall, then, there have been two continuous periods of inverse correlation, in the favor of the PRC, and none in that of Japan, and a total of six non-continuous periods of mutual decline and two in favor of mutual growth. According to Table 4.3, in 2007, South African imports of Japanese ceramic products were valued at US$163,453, and declined to US$117,187 the following year and further declined to US$40,907 in 2009. There was an increase to US$68,256 in 2010, a decrease to US$62,179 in 2011. This was then followed by a decline, with Japanese imports to South Africa decreasing to US$26,218 in 2012. These rebounded to US$29,835 in 2013, and continuously declined between 2014 and 2017, reaching US$18,897 in 2017. On the other hand, Chinese imports of ceramic products into South Africa decreased from a baseline of US$124,427 in 2007 to US$123,467 in 2008. There was another decline to US$109,580 in 2009. There was a continuous growth between 2010 and 2013, from US$160,620 to US$215,415. 2014 saw a decline to US$182,494, while 2015 saw a recovery to US$185,985. 2016 and 2017 had two consecutive declines to US$168,313 and US$155,806 respectively.

1,376,663 432,072

1,239,323 380,101

2008 820,299 169,659

2009 1,207,859 351,462

2010 1,130,996 419,008

2011 1,000,383 483,679

2012 845,126 414,513

2013 835,957 392,521

2014

724,832 336,935

2015

2017 655,479 760,598 278,898 372,643

2016

Japan PRC

163,453 124,427

2007

117,187 123,467

2008 40,907 109,580

2009 68,256 160,620

2010 62,179 183,873

2011 26,218 197,884

2012

29,835 215,415

2013

27,211 182,494

2014

23,706 185,985

2015

20,087 168,313

2016

18,897 155,806

2017

Table 4.3 Dataset of total annual South African imports of ceramic products from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

Japan PRC

2007

Table 4.2 Dataset of total annual South African imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

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Co-occurrence of increase in Chinese and decrease in Japanese imports to South Africa of ceramic products took place in 2011, 2012, and 2015. No increases in Japanese imports co-occurred with declines in Chinese imports. On the other hand, mutual declines occurred in 2008, 2009, 2014, 2015, 2016, and 2017 while mutual increases co-occurred in 2010 and 2013. Country-Specific Data: Kenya As detailed in Table 4.4, in 2007, Kenyan imports of Japanese vehicles were valued at US$411,025 and increased in 2008 to US$425,889. There was then a decrease to US$361,198 in 2009. A rebound to US$435,440 in 2010 was followed by a decline to US$383,264. There was then continuous growth from 2012 to 2014, peaking at US$634,137. There was then a continuous decline from 2015 through to 2017, reaching US$513,082. On the other hand, Chinese imports of vehicles to Uganda saw growth to US$97,532 in 2008 from a baseline of US$5436 in 2007. There was a decline to US$83,167, and a rebound to US$98,222 in 2010 that continued to grow continuously until 2015 when it reached US$347,771. In 2016 there was a decline to US$159,498 and growth in 2017 to US$186,484. Growth of Chinese imports of vehicles into Uganda co-occurred with decreases in Japanese imports of the same product in 2009, 2011, and 2013, whereas the inverse occurred in 2008 and 2015. Mutual growths did not occur. Mutual declines occurred in 2010 and 2017. As Table 4.5 shows, in 2007, Kenyan imports of Japanese iron and steel were valued at US$51,824 and increased in 2008 to US$79,649. There was then a decrease to US$62,413 in 2009. A rebound to US$76,725 in 2010, and US$129,383 in 2011 was followed by a decline to US$105,029 in 2012. There was then continuous decline from 2014 to 2016, when they reached US$130,915. 2017 saw a rebound to US$158,885. On the other hand, Chinese imports of iron and steel to Kenya saw growth to US$51,028 in 2008 from a baseline of US$27,029 in 2007. There was a decline to US$27,280, and a rebound to US$29,398,222 in 2009 and 2010 respectively. This growth trend continued, with Ugandan import of Chinese iron and steel irreversibly surpassing those of Japan in 2015, through to 2016 when it reached US$208,221, and declined to US$188,031 in 2017.

411,025 84,444

425,889 97,532

2008 361,198 83,167

2009 435,440 98,222

2010 383,264 116,277

2011 434,936 162,903

2012 522,020 213,269

2013 634,137 254,354

2014

609,491 347,771

2015

539,297 159,498

2016

513,082 186,848

2017

Japan PRC

51,824 27,029

2007

79,649 51,028

2008 62,413 27,280

2009 76,725 29,398

2010 129,383 36,442

2011 105,029 50,249

2012

192,610 65,642

2013

173,016 144,873

2014

155,391 199,186

2015

130,915 208,221

2016

158,885 188,031

2017

Table 4.5 Dataset of total annual Kenyan imports of iron and steel from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

Japan PRC

2007

Table 4.4 Dataset of total annual Kenyan imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

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Growth of Chinese iron and steel into Uganda co-occurred with decreases in Japanese imports of the same product in 2012, 2014, 2015, and 2016, whereas the inverse occurred in 2017 only. Mutual growths occurred in 2008, 2010, 2011, and 2013. Mutual declines occurred only in 2009. Country-Specific Data: Uganda In the case of Uganda, the top two Japan-dominated import markets as at the year 2007 were vehicles and construction equipment. The respective values and their subsequent growths or decline through to the year 2017 are summarized in Tables 4.4 (vehicles) and 4.5 (construction equipment). The comparative movement of these is analyzed below. As represented in Table 4.6, in 2007, Ugandan imports of Japanese vehicles were valued at US$163,213, and increased continuously from 2008 through 2014 where it peaked at US$277,594. There was then a decrease to US$240,445 in 2015, US$170,999 in 2016, and a growth to US$212,778 in 2017. On the other hand, Chinese imports of vehicles into South Africa increased from a baseline of US$14,786 in 2007 to US$21,507 in 2008. There was a decline to US$21,043 in 2009, and US$18,222 in 2010. There was a continuous growth between 2011 and 2012, from US$30,634 to US$70,595 respectively. 2013 saw a decline to US$37,675, while 2014 saw a recovery to US$51,006. In 2015, the imports rebounded to US$65,251. 2016 and 2017 had declines to US$63,251 and US$41,467 respectively. Growth of Chinese imports of vehicles into Uganda co-occurred with decreases in Japanese imports of the same product in 2015, whereas the inverse occurred in 2009, 2010, 2013, and 2017. Mutual growths occurred in 2008, 2011, 2012, and 2014. Mutual declines occurred in 2016. According to Table 4.7, in 2007, Ugandan imports of Japanese construction equipment were valued at US$24,259, and increased in 2008 to US$34,469. There was then a decrease to US$16,815 in 2009, and continuously so until 2013 where it reached US$0. From this, there was a growth to US$2515 in 2014, US$19,997 in 2015, a decline to US$16,441 and US$6333 in 2016 and 2017 respectively. On the other hand, Chinese imports of construction equipment to Uganda saw continuous declines that reached US$283-thousand in 2010 from a baseline of US$5436 in 2007. There was a rebound to US$4391 in 2011,

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and US$15,989 in 2012, US$25,394 in 2013. A decline to US$10,045 and US$7675 in 2014 and 2015 respectively. A rebound to US$15,590 occurred in 2016 and was followed by a decline to US$11,613 in 2017. Growth of Chinese imports of construction equipment into Uganda co-occurred with decreases in Japanese imports of the same product in 2009, 2011, and 2013, whereas the inverse occurred in 2008 and 2015. Mutual growths did not occur. Mutual declines occurred in 2010 and 2017.

4.6

Analysis of Findings

The datasets for all three countries (South Africa, Kenya, and Uganda) make a total of 66 “incidences.” Incidences in this chapter are conceptualized as year-on-year shifts in which imports for either of the exporters could have either increased, decreased or remained unmoved, and similarly the balance between them. As it happens, in none of the years was there an incidence of non-growth or non-decline for either of the countries involved. For all the datasets, there were downward and upward movements for each year. As a comparative study, the hypothesis of the present chapter will be answerable by determining the contrast in the movements; either toward mutual or inverse growths and/or declines for both the exporters—Japan and China—in all three African states, as well as noting whether at the tail end of the study (2012–2017), Japan had been replaced by the PRC as the principal import source for the countries and products, and whether such as a surpassing was maintained (as at the end of the dataset in the year 2017). The totality of the incidences for each country is summarized in Fig. 4.1, while the mean scores for all 66 incidences across the four scenarios are summarized in Fig. 4.2. The chapter postulated the following hypothesis: increases in PRC imports of the given products in the given year(s) always correlate with decreases in Japanese importation into these countries. From this, we postulated two hypotheses: H1 All increases in PRC exports to the given country co-occur with decreases in Japanese exports of the given product in the given year(s); H2 No decreases in PRC and Japanese exports of the given product(s) to the given country in any given year(s) can mutually occur.

163,213 14,786

163,281 21,507

2008 195,002 21,043

2009 241,144 18,222

2010 257,048 30,634

2011 262,299 70,595

2012 267,971 37,675

2013 277,594 51,006

2014

240,445 65,471

2015

170,999 63,251

2016

212,778 41,467

2017

Japan PRC

24,259 5436

2007

34,469 225

2008 16,815 297

2009 6581 283

2010 5038 4391

2011 1 15,989

2012

0 25,394

2013

2515 10,045

2014

19,997 7675

2015

16,441 15,590

2016

6333 11,613

2017

Table 4.7 Dataset of total annual Ugandan imports of construction equipment from Japan and the PRC between 2007 and 2017 (in ‘000 of US$)

Japan PRC

2007

Table 4.6 Dataset of total annual Ugandan imports of vehicles from Japan and the PRC between 2007 and 2017 (in ‘000 of US$) 4 JAPAN: ECONOMICALLY HOT, POLITICALLY COLD

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Fig. 4.1 South African, Ugandan, and Kenyan imports from Japan vs the PRC, 2007–2017: incidence summary (Author’s own calculations)

The chapter will now turn to assessing the extent of the veracity of each, with the aim of concluding on the more accurate, if any. Hypothesis 1 The first hypothesis would be proven correct if the data yielded only results which showed inverse correlation between growths in the PRC imports of the product under study with declines in the Japanese imports for that year. In the case of South Africa and Uganda, respectively, the scenario hypothesized occurred 5, while for Kenya it is 6 times. The inverse has not occurred for South Africa. For Kenya it came up to a total of 1 incidence, while for Uganda it occurred a total of 7 times. Thus, negative correlations of growths in the two countries’ exports into these countries came up to a total of 24 out of 66 possible incidences, in favor of China by 16 incidences.

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Fig. 4.2 South African, Ugandan and Kenyan imports from Japan vs the PRC, 2007–2017: generalized incidence summary mean scores (Author’s own calculations)

To prove or disprove the hypothesis, a minimum threshold in terms of the total incidences must be met; the hypothesized scenario (i.e., Chinese and Japanese imports being significantly negatively correlated) must occur in at least 51% of the scenarios. For the individual countries, the minimum threshold for the hypothesis to be proven is 11 (at least half of all the total combined imports by product, which totals at 22 since there were two product types being imported over a period of 11 years). Hypothesis 2 The second hypothesis, related to the first but broader, postulated that no decreases or increases in PRC and Japanese imports of the given product(s) in the given year(s) could mutually occur. In other words, we should not within a single year and for a similar product find instances of mutual decline for both Japan and the PRC. Here the data presents the opposite case, across different points in the dataset. As seen in Figs. 4.1 and 4.2, there have been 14 such incidences for South Africa, 13 for Kenya, and 8 for Uganda; bringing the total to 35. In this case,

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the critical level is 33 since the total possible scenarios total to 66; with a score beneath this vindicating the hypothesis, and above it disproving the hypothesis. Since it is above 33, we can determine that the hypothesis is disproven; that is, at the gross level there is no overall inverse correlation between growth in PRC imports to South Africa, Kenya and Uganda in the 2007–2017 period and their Japanese counterparts. There have been more incidences of Japanese and Chinese imports into Africa growing or declining together than moving in inverse correlations. This would appear to indicate that there is no zero-sum scenario to be detected between Japan and PRC imports, contrary to some of the literature and to the hypothesis laid out in the chapter. The extent of the validity of this, as well as the workings of this apparent finding, are further discussed in the section below. A Non-zero Sum Game: General Findings Discussed The findings of the chapter point to the lack of a general replacement of Japan by the PRC in vehicle exports in the period between 2007 and 2017. There was, however, a total surpassing of Japan by the PRC in this period in all three countries of non-vehicle exports; ceramic products in South Africa (from 2009), iron and steel imports in Kenya (from 2015) and construction equipment in Uganda (from 2012). None of these were reversed by 2017. In the timeframe, the Japanese exports of these products have manifested some volatile patterns, with growths and declines, whereas the PRC has largely consistently grown. This means that on a year-on-year basis, there may be instances of mutual growth of Japanese imports to the countries with those of China, but on the decade-long timeframe, there has been an overall surpassing of Japan by the PRC in these three non-vehicle products, which had originally been dominated by Japan. Therefore, Chinese exports of these products into all 3 countries appear to be as a result of growth in China’s own export volumes to them, while those of Japan have comparatively grown slower than those of the PRC, and sometimes displayed massive reversals. Interestingly, the years of Japan’s GDP decline (2008, 2009, and 2011) were also correlated with declines in exports to South Africa and Kenya in vehicles, as well as the secondary products (ceramics in the case of South Africa in 2008, 2009, and 2010; and iron and steel in the case of Kenya in 2008, 2009, and 2011), while Uganda saw continued growths in these years in its vehicle

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imports, but declines in its secondary product (construction equipment in 2009 and 2011). Thus some of Japan’s decline can be attributed to the general recessions seen in the country in these years, whereas China had corresponding growth levels of 9.6% to Japan’s −1% in 2008, 9.2% to Japan’s −5.5% in 2009 and 9.5% to Japan’s −0.5% in 2011. Further, China not only overtook Japan in what were import sectors dominated by it in these countries, it also developed a differential market in which it is increasingly growing which forms its third most critical import into Kenya especially, but in which Japan has virtually no import activity; locomotives and rail.

4.7

Conclusion

Using the case studies of South Africa, Kenya and Uganda between 2007 and 2017 in a simplistic hypothesis test, this chapter sought to identify whether there is any validity to the notion that as Chinese imports into the African continent increased, they were directly correlated with a decrease in Japanese imports of the same products. Empirical evidence of a negative effect of increases in PRC imports on their Japanese counterparts into these three African states studied were found lacking, as it would appear that there is no zero-sum game to be spoken of, despite the prevalence of literature claiming it to exist—at least in the realm of export markets.

References Ampiah, Kweku. 2011. Anglo-Japanese Collaboration About Africa in Early 1960s: The Search for ‘Complementarity’ in the Middle of Decolonisation. The Journal of Imperial and Commonwealth History 39 (2): 269–295. Chung, Chien-Peng. 2012. China–Japan Relations in the Post-Koizumi Era: A Brightening Half-Decade? Asia-Pacific Review 19 (1): 88–107. Cornelissen, Scarlett. 1998. Japan’s ‘Africa Thrust.’ South African Journal of International Affairs 6 (1): 7–20. Davies, Martyn. 2008. How China Delivers Development Assistance to Africa. Stellenbosch, South Africa: Centre for Chinese Studies. Kato, Hiroshi. 2017. Japan and Africa: A Historical Review of Interaction and Future Prospects. Asia-Pacific Review 24 (1): 95–115. Kim, Soyeun. 2012. Japan’s ‘Common but Differentiated’ Approach to Sustainable Development and Climate Change in Africa. Japanese Studies 32 (2): 255–274.

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Lehman, Howard P. 2010. Introduction: The Global Politics of Japanese–African Relations. In Japan and Africa: Globalization and Foreign Aid in the 21st Century, ed. Howard Lehman. New York: Routledge. Rose, Caroline. 2012. Discourses on Japan and China in Africa: Mutual Misalignment and the Prospects for Cooperation. Japanese Studies 32 (2): 219– 236. Samuels, Richard J., and Corey Wallace. 2018 (July). Introduction: Japan’s Pivot in Asia. International Affairs 94 (4): 703–710.

CHAPTER 5

India: Between Two Southern Powers

5.1

Introduction

India and China have emerged as this century’s greatest success stories not only in Asia but also the world over. These two economies, whose combined gross domestic product (GDPs) account for some 27.16% of the global GDP, and whose population make up 36.28% of humanity provide a good basis for comparative analysis (International Monetary Fund 2018; Statistics Times, July 2018). Against such a background, this chapter is a comparative analysis of growths in South African exports to China and India between 2001 and 2017, in order to assess their annualized and overall growth for the period. It seeks to find out which of the two Asian risers has registered a greater amount of growth on an annual and overall period in importing South African exports. The chapter made a comparison of their own initial basis and to the other with the intention of finding out why South African exports to India continued to be outweighed by those to China. Specifically, the chapter advanced and tested these two hypotheses: H1 South African exports to India grew less than exports to China on an annual basis. H2 South African exports to India had fewer years of growth than exports to China. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_5

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With South African exports to India already operating from a lower base, if these two hypotheses did not prove null, the findings would explain the comparatively lower trade relations between India and South Africa against their South Africa–China counterparts to the present. Indeed, the two hypotheses proved true. Firstly, in overall terms, the data indicates that exports to China have outgrown those to India for the 2001–2017 time-period. Having registered an average growth rate of 25.18% per year, and 403.03% overall, they have thus also outgrown Indian exports by 1.06% on an annual basis, and 16.97% for the entire period who have registered the lower 24.12% on an annual basis, and 386.06% overall. Thus, China would appear to be the more significant export market for South Africa on account of these differentiated paces of growth. Also consistent with the second hypothesis, as there were indeed more combined years of continued growth in China-bound exports compared to India-bound exports. Further observations made included the fact that while China has consistently been the leading exporter to South Africa in its bilateral relationship with the latter (resulting in an uninterrupted balance of trade surplus in China’s favor), South Africa has maintained a trade surplus for 8 of the 17 years in its trade relationship with India. In an additional test of the degree to which South African exports to China and exports to India for specific products (particularly those which in 2001 were China-led), iron and steel and machinery, were inversely related to one another, there were indeed more incidences of inverse growth in exports, with India replacing China as the principal importer of South African machinery in 2009, again in 2011 and for the entire 2014–2017 period. That this should be the case indicates some volatility in South African exports to India, and at the same time shows that either South Africa had in 2001, or subsequently, developed or enhanced production of export products of which China imports more than India apart from machinery. Indeed, the principal Chinese imports from South Africa presently consist of ores while those to India are electrical machinery. These four findings, in addition to the fact that China-bound exports began from a higher base, demonstrate South Africa’s comparative proximity compared to South Africa-India trade relations. South Africa not only exports more to the former, but also, at least at face value, is more reliant on China-sourced imports. The chapter will provide a literature review, assessing Sino-Indian relations and the degree to which they have conflicting Africa- and

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South Africa-focused strategies of engagement. The chapter subsequently provides a description of the methodology to be used in the chapter. The fourth section then reviews the results made from the data. The fifth section discusses the findings made and extends the study to include a comparison of South Africa’s balance of trade with India and China and the degree to which there were inverse correlations in South Africa’s exports of its top two products to China and India during this period.

5.2

Literature Review

The economies of China and India are two of the fastest growing economies in the world. On the one hand, the rise of China, as prognosticated Ikenberry (2008), “will undoubtedly be one of the great dramas of the twenty-first century.” That this prediction could be made in 2008 is telling, for while much of the world was steeped in economic malaise and a recession in the following year, signifies that China’s economy was rather buoyant, registering 9.6% in 2008 and 9.2% in 2009. The country sustained this growth trajectory and sustained it for the 2007– 2017 period, and grew on average at 8.78% (Knomea 2018). The size of its economy has quadrupled since the launch of market reforms in the late 1970s. The reforms that took place since the late 1970s were a major boost to the country’s GDP from an annual average of 6% between 1953 and 1978 to 9.4% between 1978 and 2012 and grew from being a US$50-billion economy to a US$6-trillion economy (Yao 2019). The country also saw its domestic savings-to-GDP ratio grow from 48.84% in 1980 to 53.47 (The Guardian 2016). On the other hand, India, like China, was also growing during the 2008/2009 global economic crisis, never once registering a quarter of negative growth throughout the 2008–2009 period; its GDP reaching growth levels of more than 6% throughout this period, making it, after only China, the second fastest grower in the global economy. The country’s GDP grew from US$270.5-billion in 2000 to US$2.957-trillion by 2019 against the backdrop of an annual GDP growth of 6.6% from 1990 (The Hindu Business Line 2011; Statista 2019). In addition to its soft power status on account of it being the world’s largest democracy, the country has at its disposal the world’s second-largest military and also maintains “a strategic position at the crossroads of the Persian Gulf, Central Asia, and Southeast Asia” (Cohen, June 2000). Further, its population is set to pass over China’s by 2024 (Chaubey 2017).

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The rise of China and India has been the subject of much scholarly analysis. Typically, these countries are cast as emerging powers who will soon surpass the US at some future point. But the work of Mthembu (2018) problematizes this reading of Beijing and New Delhi’s status in world politics. The core message in Mthembu’s work is that these countries are no longer “emerging” but are instead to be seen as “Southern powers.” In other words, they have already arrived—accounting for 27.16% of the global GDP between each other; further, buttressed by exponential growth in their economies since the 1980s and 1990s respectively, China and India, have been active international aid disbursers since the early 2000s, and are producing a fresh set of ideas that are challenging the status quo and affecting the global power balance (Mthembu 2018: 83). To be sure, both countries have sought to court South Africa and Africa at large. With clear anti-colonial and anti-apartheid credentials, and significant diasporas in the country, the two countries have sought to utilize these soft power leverage points to further enhance their commercial relationship with the country (Mthembu, 2018: 90). Both, separately and together, have frequent interaction points with Pretoria. India has the additional platforms of the India, Brazil and South Africa (IBSA) Forum, as well as the Indian Ocean Rim Association (IORA) which have both countries as members but not China. Further, both countries have Africaspecific forums, though the much younger India–Africa Forum has seen far less substantial financial commitments by India to Africa and attendance by African heads of state and government than the 2000-founded Forum on China–Africa Cooperation (FOCAC) (Mthembu 2018: 23). Perceptions of Competition Between China and India One statistic summarizes the imbalance between China and India: “for every two-year period since 2008, the increment of growth in China’s GDP has been larger than the entire economy of India” (Allison 2017: 7). The notion of these two countries, who have a history of dyadic conflict with one another, has been made irresistible. Among the principal sites of the contest between the two is South Asia itself, with the two having had clashes on their own borders, as well as over the Bhutan–China border. Evidently, their competition and historical causes of conflict have not only stemmed from dyadic reasons, but also from their network of alliances and obligations. This has been intensified by the assumption of leadership in

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the two respective countries from economically-minded pragmatic leaders from 2000 to 2012 in the persons of Hu Jintao and Manmohan Singh to the more nationalistic Xi Jinping and Narendra Modi, in the 2012 and 2014 period. The two countries participated in a skirmish in 2017 on account of China carrying out construction on land that belongs to Bhutan, a country with which India has a mutual defense treaty (Myers et al. 2017). No casualties came about, but it was a reminder of the volatility of the cordiality between the two countries. It also showed their competitive streak. For some, this also extends to Africa: “India is suspicious about the presence of Chinese navy that leads her to build thirty-two radar stations for monitoring in different countries including Mauritius, Seychelles, and Madagascar” (World Politics 2018). This competition extends to differences in economic worldview. To these ends, even though both countries share common platforms, they are also patrons of competing global economic visions. To counter the OBOR, according to some observers (e.g., Nair 2017; Sanwal 2017), India and Japan proposed the Asia–Africa Growth Corridor (AAGC). For its part, South Africa has sought to associate with both these markets. It accepted China’s invitation into the loose association of emerging markets now composed of Brazil, Russia, India, China, and South Africa, and as a result all three countries also interact in this forum, which holds annual summits and has established “alternative” structures to the World Bank and International Monetary Fund in the form of the New Development Bank and Contingency Reserve. But on the main, BRICS involvement for South Africa has meant enhancing its relationship with China. Analyzing BRICS investment in the Johannesburg Stock Exchange (JSE), for example, Ndzendze (2018a, b), finds that the majority of South Africa’s post-BRICS entry inward investment has come from China; “from the Industrial and Commercial Bank of China’s stake in Standard Bank, acquired in 2007, to Gold One’s stake in Sibanye, most of the BRICS investments in corporate SA have been in line with the traditional alignment between SA and China that predates and transcends their BRICS membership, with China being SA’s principal export and import partner.” Despite this, which is perhaps to be expected given China’s larger economy, there has been a clear number-two in the form of India. India’s relationship with South Africa is also among one of its most important, especially in terms of exports and which ranks 4th in the list of South Africa’s trade partners.

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Stemming from this, this chapter seeks to ask: what trends have rendered South African exports to India laggards compared to its exports to China? Has it been a case of inconsistent growth? Has it been slower growth? Or has it indeed been both? Additionally, as questions of the extent of China’s “win-win” cooperation with African countries have gained much traction in academic analyses as well as in the popular press, with some appraisals, for example, rendering China as “mercantilist” due to the crowding-out impact of Chinese textiles and steel on these industries in South Africa (Esposito and Tse, November 2015; Daniels, May 2018), this chapter contributes to our understanding of the import– export dynamics of South Africa’s engagement with China by focusing on South Africa’s market access in China.

5.3

Methodology

This chapter makes use of a quantitative methodology that seeks to measure, both on a within-case and cross-case comparison, growth and/or decline of South Africa’s exports to China and India in the 2001– 2017 period. The aim of the research is to ascertain why India-bound exports did not come to match or exceed their China-bound counterparts by the tail end of the period. The chapter will, therefore, rely on the following variables. As an independent variable, this chapter adopts the presence of South African exports to China, and as a dependent variable, the chapter adopts the subsequent movement (either growth or decline) in exports to India compared to their China-bound counterparts. Secondarily, the chapter will assess the balance of trade between South Africa and the two countries to ascertain which, between them, South Africa is most dependent on for its imports. Finally, the chapter will follow movements of South Africa’s top two export goods to China and gauge increases in their Indian market. Important here will be detecting whether South African exports to China and India are, to some degree, inversely correlated (and thus growth in exports to one may be aided by decrease in exports to the other).

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Hypotheses The chapter seeks to test the following hypotheses. H1: South African exports to India grew less than exports to China on an annual basis in the 2001–2017 period. H2: South African exports to India had fewer years of growth than exports to China in the 2001–2017 period.

5.4

Results

Table 5.1 is a summary of South African exports to the PRC and India between 2001 and 2017 in raw terms. The first column captures data on total South African exports to the PRC in millions of US dollars, while the second column is a representation of the data on South African exports to India in the same currency for each of the years between 2001 and 2017. Table 5.1 Total South African exports to the PRC and India, 2001–2018

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total SA exports to the PRC (in US$ millions)

Total SA exports to India (in US$ millions)

461.312 450.298 889.148 1055.746 1368.724 2108.757 4169.608 4309.780 5670.123 8095.827 12,495.814 10,320.514 12,047.236 8770.890 7420.282 6812.081 8666.175

368.911 351.054 380.290 567.192 1170.335 783.553 1349.482 2279.522 2067.689 3032.648 3373.715 3737.179 3002.135 3755.564 3189.476 3150.930 4139.065

Source TradeMap (2019), ‘South Africa’s exports to China’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap (2019) ‘South Africa’s exports to India’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c699%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

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Table 5.2 Annualized growth and decline in South African exports to China and India

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total movement SA exports to the PRC (in %)

Total movement in SA exports to India (in %)

−2.38 97.45 18.73 29.64 54.06 97.72 3.36 31.56 42.78 54.34 −17.4 16.73 −27.19 −15.39 −8.19 27.21

−4.8 8.3 49.1 106.3 −33 72.2 68.9 −9.2 46.6 11.2 10.7 19.6 25 −15 −1.2 31.36

Source TradeMap (2019), ‘South Africa’s exports to China’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap (2019) ‘South Africa’s exports to India’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c699%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

Converting the data into annualized movements allows us to infer the levels of growth on an annual basis as well as for the overall 2001–2017 period. In Table 5.2, the first column represents the years from 2002 through 2017. The second and third columns capture the data as total annual percentiles of movement in South African exports to China and India compared to the previous years.

5.5

Analysis

The data indicates that on both raw and proportional terms, exports to the PRC outweigh those to India. From Table 5.1 we infer that exports to China began with a higher initial baseline value of US$461.312million, while those to India began with an initial US$368.312-million.

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On the tail end of the dataset, the exports had grown to US$8666.175million and US$4139.065-million. From Table 5.2, it is evident that the two countries’ exports have registered high volumes of growth over the period. Figure 5.1 is a graphic representation of the data in Table 5.2 and more visually depicts the trends. Hypothesis 1 South African exports to India grew less than exports to China on an annual basis in the 2001–2017 period. In terms of growth, the data indicates that exports to China have outgrown those to India for the 2001–2017 time-period. Having registered an average growth rate of 25.18% per year, and 403.03% overall, they have thus outgrown Indian exports by 1.06% on an annual basis, and 16.97% for the entire period who have registered 24.12% on an annual basis, and 386.06% overall. Thus, China would appear to be the more significant export market for South Africa. Hypothesis 2 South African exports to India had fewer years of growth than exports to China 2001–2017 period. As a proportion of their 2001 levels, both Chinese and Indian imports of South African goods have grown almost continuously, with some interruptions for China in the years 2002, 2012, as well as between 2014 and 120

Movement in exports (in %)

100 80 60 40 20 0 0

2

4

6

8

10

12

14

16

18

-20 -40

Time series (years) South African exports to China

South African exports to India

Fig. 5.1 Growth and decline in South African exports to China and India, 2002–2017

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2016. Exports to India, on the other hand, saw declines in the years 2002, 2006, 2009 as well as in the entire 2015–2016 period. Overall then, there have been 5 years of decline for China-bound exports, and 6 years of decline in India-bound exports. This is consistent with the hypothesis, as there were indeed more combined years of continued growth in China-bound exports compared to India. Assessing the Balance of Trade Insofar as the chapter is intended on gaining insight into South Africa’s exports into the two countries, it is also worth considering the exportto-import ratio of South African exports to either country. This allows us to infer the impact of volatility from the South African side. From Table 5.3, it is evident that while China has been the leading exporter to South Africa in its bilateral relationship with the latter, South Africa has maintained a trade surplus for 8 of the 17 years in its trade relationship with India. Noticeably, five of the years when India had a surplus also coincided with the years wherein South Africa’s exports to India had Table 5.3 Balance of trade in South African exports to the PRC and India

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total SA balance of trade with the PRC (in US$ millions)

Total SA balance of trade with India (in US$ millions)

−603,119 −909,101 −1,321,421 −2,519,182 −3,576,887 −4,770,698 −4,393,137 −5,599,486 −2,655,183 −3,405,247 −1,712,002 −4,295,051 −3,940,158 −6,668,174 −8,250,829 −6,724,639 −6,557,758

121,415 70,964 −35,870 −138,982 67,787 −829,682 −428,054 17,587 256,102 186,362 −644,743 −856,918 −2,369,738 −787,094 −1,031,513 46,928 224,252

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declined as captured in Table 5.1, namely 2002, 2006, 2009, 2016, and 2017. This indicates some volatility on the part of South Africa’s exports to India, which is less noticeable in its exports to China. Thus, South Africa has a larger dependency on China who has been the consistent net exporter to it. A Test of Inverse Correlations A further caveat stems from the fact that the chapter only measured the overall trade figures. While this represents the general trend over the past fifteen years, it also risks not accounting for movement on specific products. When we make an analysis of the two countries’ product-specific imports of South African 2 product types. The analysis will ascertain whether or not there is a negative correlation wherein China’s imports coincide with declines in those to India and vice versa. Importantly, the two products being studied are iron and steel as well as machinery. These products were chosen because as at 2001, they had been the principal importer’s principal imports; in other words, by tracing over time South Africa’s export of goods nominally dominated by China to India, we will be able to detect whether there is an inverse correlation. That is, is South Africa’s exporting of either good to either importer a mutually exclusive phenomenon? Answering this will allow us to explain the degree to which South African exports to India were rendered lower due to South Africa exporting more to China for the entire period. Tables 5.4 and 5.5 depict the data on South African exports to China and India in raw terms (i.e., in total US dollar terms). Figure 5.2 adapts those data points and converts them into incidences of growth and decline for either country across four scenarios; firstly, exports to China could grow while those to India decline, secondly, exports to China could decline while those to India decline, thirdly, both countries could observe mutual decline in South African exports and finally both countries could observe mutual growths in South African exports. The first two form the broad category of “inverse correlation” and will be added up. The latter two form the broad category of “positive correlation” and will likewise be added up. In counting up the total incidents for either scenario, we will be able to conclude on which category scenario has occurred the most.

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Table 5.4 South African exports of iron and steel to China and India, 2001– 2017

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total annual South African exports of iron and steel to the PRC (in US$-millions)

Total annual South African exports of iron and steel to India (in US$-millions)

89.677 88.087 276.130 267.100 249.417 335.371 869.350 605.703 987.989 929.722 1192.354 735.868 1090.885 1155.471 1338.368 1244.684 876.729

32.048 23.848 39.938 69.654 168.377 112.393 143.006 258.767 185.804 270.384 371.082 577.726 367.484 431.158 245.539 139.711 130.459

Source TradeMap (2019), ‘South Africa’s exports to China’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap (2019) ‘South Africa’s exports to India’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c699%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

As represented in Fig. 5.2, South African exports of iron and steel products to China and India inversely grew a total of 9 times out of a possible 16, while they were positively correlated 7 times out of 16. On the other hand, Fig. 5.2 shows exports of South African machinery products to China and India inversely growing a total of 8 times out of a possible 16, and positive correlations 8 times out of 16. Taken together, these figures demonstrate mixed results, but there is indeed more evidence of inverse correlation with a total of 17, which passes the minimum threshold of 16 (i.e., half of 32, which is the total of combined possible scenarios). Further, there appear to have been more incidences of exports to India growing in years wherein exports to China declined—for iron and steel there were 5 such years (with 4 for China-bound exports), while for machinery there were also 5 such years (with 3 for China-bound

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Table 5.5 South Africa’s exports of machinery to China and India, 2001–2017

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total annual South African exports of machinery to the PRC (in US$-millions)

Total annual South African exports of machinery to India (in US$-millions)

56.805 9.404 38.378 45.905 43.325 46.625 61.449 38.327 26.160 72.124 39.707 94.181 162.890 98.600 19.055 21.966 22.091

12.360 13.097 33.136 20.012 25.169 64.027 26.971 23.728 27.074 65.059 124.671 75.632 96.621 132.974 132.114 148.531 157.428

Source TradeMap (2019), ‘South Africa’s exports to China’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap (2019) ‘South Africa’s exports to India’ https://www.trademap.org/Bilateral_TS. aspx?nvpm=1%7c710%7c%7c699%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1. Calculations by author

exports). However, as shown in Table 5.4, India did not surpass China as the comparatively larger importer of South African iron and steel, and only surpassed China as the principal importer of machinery briefly in 2009, again in 2011 and for the 2014–2017 period. That this should be the case indicates the volatility in South African exports to India, and at the same time shows that either South Africa had in 2001, or subsequently, developed or enhanced production of export products of which China imports more of than India apart from machinery. Indeed, the principal Chinese imports from South Africa include ores while those to India are electrical machinery (different from the product category studied above).

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Fig. 5.2 Generalized incidence summary of South African exports to China and India, 2001–2017 (Source TradeMap [2019], ‘South Africa’s exports to China’ https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c% 7c156%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c and TradeMap [2019] ‘South Africa’s exports to India’. Calculations by author)

5.6

Conclusion

This chapter set out to test two related hypotheses, namely that South African exports to China, as a proportion of their 2001 levels, outgrew their India-bound counterparts, and secondly, that South African exports to India grew less consistently when compared to their China-bound counterparts. With South African exports to India already operating from a lower base, if these two hypotheses did not prove null, the findings would explain the comparatively lower trade relations between India and South Africa against their South Africa–China counterparts. The two hypotheses proved true. Firstly, in terms of growth, the data indicates that exports to China have outgrown those to India for the 2001–2017 time-period. Having registered an average growth rate of 25.18% per year, and 403.03% overall, they have thus outgrown Indian exports by 1.06%

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on an annual basis, and 16.97% for the entire period who have registered 24.12% on an annual basis, and 386.06% overall. Thus, China would appear to be the more significant export market for South Africa. Secondly, as a proportion of their 2001 levels, both Chinese and Indian imports of South African goods have grown almost continuously, with some interruptions for China in the years 2002, 2012, as well as between 2014 and 2016. Exports to India, on the other hand, saw declines in the years 2002, 2006, 2009 as well as in the entire 2015–2016 period. Overall then, there have been 5 years of decline for China-bound exports, and 6 years of decline in India-bound exports. This is consistent with the hypothesis, as there were indeed more combined years of continued growth in China-bound exports compared to India. Further observations made include that while China has consistently been the leading exporter to South Africa (resulting in an uninterrupted balance of trade surplus in China’s favor) in its bilateral relationship with the latter, South Africa has maintained a trade surplus for 8 of the 17 years in its trade relationship with India. In an additional test of the degree to which South African exports to China and exports to India for specific products (particularly those which in 2001 were China-led), iron and steel and machinery, there were indeed more incidences of inverse growth in exports. With India replacing China as the principal importer of machinery in 2009, again in 2011 and for the 2014–2017 period. That this should be the case indicates the volatility in South African exports to India, and at the same time shows that either South Africa had in 2001, or subsequently, developed or enhanced production of export products of which China imports more of than India apart from machinery. Indeed, the principal Chinese imports from South Africa include ores while those to India are electrical machinery (different from the product category studied above). These four findings, in addition to the fact that Chinabound exports began from a higher base, demonstrate South Africa’s comparative proximity compared to India. South Africa not only exports more to the former but also, at least at face value, is more reliant on China-sourced imports.

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References Allison, Graham. 2017. Destined for War: Can America and China Escape Thucydides’s Trap? Boston, MA: Houghton Mifflin Harcourt. Chaubey, Santosh. 2017. India Likely to Surpass China’s Population by 2024. Times of India, June. https://www.indiatoday.in/india/story/india-chinapopulation-984014-2017-06-21 Cohen, Stephen P. 2000. India Rising. Brookings, June. Retrieved March 18, 2019, from https://www.brookings.edu/articles/india-rising/. Daniels, Nicola. 2018. China Hopeful of Creating More Jobs in SA, Africa. Cape Times, May. Retrieved March 17, 2019, from https://www.iol.co.za/capeti mes/news/china-hopeful-of-creating-more-jobs-in-sa-africa-15014699. Esposito, Mark, and Terence Tse. 2015. China’s Growing Footprint in Africa Is Potentially Damaging. Fortune, November. Retrieved March 17, 2019, from http://fortune.com/2015/11/20/china-africa-damaging-ties/ (Last accessed: 19 November 2019). Ikenberry, J. 2008. The Rise of China and the Future of the West. Foreign Affairs 87 (1): 23–37. International Monetary Fund. 2018. GDP Based on PPP, Share of World. International Monetary Fund, January. Retrieved March 11, 2019, from https://www.imf.org/external/datamapper/PPPSH@WEO/OEMDC/ ADVEC/WEOWORLD/IND. Knomea. 2018. China—Gross Domestic Product in Constant Prices Growth Rate. Knomea Productions, December. Retrieved March 1, 2019, from https://knoema.com/atlas/China/Real-GDP-growth?compareto=us. Mthembu, P. 2018. China and India’s Development Cooperation in Africa: The Rise of Southern Powers. London: Palgrave Macmillan. Myers, Steven Lee, Ellen Barry, and Max Fisher. 2017. How India and China Have Come to the Brink Over a Remote Mountain Pass. The New York Times, July. Retrieved January 22, 2019, from https://www.nytimes.com/2017/ 07/26/world/asia/dolam-plateau-china-india-bhutan.html (Last accessed: 5 March 2019). Nair, Avinash. 2017. To Counter OBOR, India and Japan Propose Asia-Africa Sea Corridor. The Indian Express, May 31, pp. 1–2. Ndzendze, Bhaso. 2018a. Implications of the US-Led War on Terror for AfricaChina Relations. UJCI Africa-China Occasional Paper No. 4. Ndzendze, Bhaso. 2018b. BRICS Members’ Low Investment in JSE Points to Limited Economic Ties. Business Day, July. Retrieved February 22, 2019 from https://www.businesslive.co.za/bd/opinion/2018-07-24brics-members-low-investment-in-jse-points-to-limited-economic-ties/ (Last accessed: 5 March 2019). Sanwal, Mukul. 2017. A New Equilibrium with China: Near Simultaneous Rise of Neighbours Is Not Unprecedented in Asia. Institute for Defence Studies

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and Analyses, Retrieved March 12, 2019, from http://www.idsa.in/idsaco mments/anewequilibriumwithchina_sanwal_250817?q=print/ (Last accessed: 5 March 2019). Statista. 2019. India: Gross Domestic Product (GDP) in Current Prices from 2012 to 2022 (in Billion U.S. Dollars). Statista. Retrieved January 21, 2019, from https://www.statista.com/statistics/263771/gross-domestic-pro duct-gdp-in-india/ (Last accessed: 14 November 2019). Statistics Times. 2018. China vs India by Population. Statistics Times, July. Retrieved March 11, 2019, from http://statisticstimes.com/demographics/ china-vs-india-population.php (Last accessed: 14 November 2019). The Guardian. 2016. China GDP: How It Has Changed Since 1980. The Guardian. Retrieved from https://www.theguardian.com/news/datablog/ 2012/mar/23/china-gdp-since-1980#data (Last accessed: 14 November 2019). The Hindu Business Line. 2011. India’s Annual Average GDP Growth at 6.6% in 1990–2010. The Hindu Business Line, August. Retrieved March 1, 2019, from https://www.thehindubusinessline.com/economy/indias-annual-ave rage-gdp-growth-at-66-in-1990-2010/article23054977.ece (Last accessed: 14 November 2019). TradeMap. 2019. South Africa’s Exports to China. TradeMap. Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c156% 7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c1%7c1%7c1 (Last accessed: 7 March 2019). World Politics. 2018. China-India Trade Wars in Africa. World Politics. Retrieved February 25, 2019, from https://theworldpolitics.org/china-india-tradewars-in-africa (Last accessed: 11 November 2019). Yao, Kevin. 2019. Exclusive: China to Set Lower GDP Growth Target of 6-6.5 Percent in 2019—Sources. Reuters, January. Retrieved February 25, 2019, from https://www.reuters.com/article/us-china-economy-targets-exclusive/ exclusive-china-to-set-lower-gdp-growth-target-of-6-6-5-percent-in-2019-sou rces-idUSKCN1P50CJ (Last accessed: 11 November 2019).

CHAPTER 6

United States: An Imaginary Scramble for Markets?

6.1

Introduction

The period between 2000 and 2017 saw an exponential increase in China–Africa ties. These were especially heightened after the 2008 financial crisis. Overall, China–Africa trade grew by an average of 20% per year to US$188-billion in the period between 2007 and 2017, with imports and exports more or less growing at the same pace, while Chinese foreign direct investment (FDI) into Africa grew by 40%, to approximately US$32-billion in the same time frame.1 For the same time frame, US–Africa relations have received scrutiny, with the United States (US) argued to be seemingly losing much of the momentum it had appeared to gain in the post-Cold War period.2 Nevertheless, this literature is somewhat misleading as the US is still a major trade partner to countries on the continent, with still-growing trade relations, currently standing at approximately US$53-billion. This has spawned numerous other works of commentary and analytical assessment. One of the major schools of 1 American Enterprise Institute, ‘China Global Investment Tracker,’ American Enterprise Institute, 2019. Available at: http://www.aei.org/china-global-investment-tracker/ (Last accessed: 31 July 2019). 2 See for example, Brands, Hal, American Grand Strategy in the Age of Trump (Washington, DC: Brookings Institution Press, 2018), and Daalder, Ivo H. and Lindsay, James M., ‘The Committee to Save the World Order,’ Foreign Affairs, September 30, 2018.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_6

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thought to emerge has been one which views the US and the People’s Republic of China’s (PRC) trade access to Africa as mutually exclusive and the two entities, one a “status quo power” and the other an “emerging power,” as engaged in competition for greater involvement at the expense of the other. But while many works abound and postulate a “new scramble for Africa” (according to which there is a zero-sum competition for access to Africa by the US and China in the twenty-first century), very few actually present evidence to bear on these claims. Even when presented, these works are based on little rigorous and empirical analysis, and often have unclear methodologies. This chapter sought to present an empirical and data-informed assessment of the extent to which increasing Chinese export activity into two African countries—in this study South Africa and Kenya—was directly correlated with a decrease in US exports into these very same markets for its top three mutual exports into these two countries from the period immediately preceding the 2008 Great Recession through to 2017. In the case of South Africa, the top three US-dominated import markets as at the year 2007 were vehicles, mineral fuels, and medical equipment. In the case of Kenya, the top three US-dominated import markets as at the year 2007 were textiles, cereals, and chemical products. On the basis of this, then, the chapter postulates the following hypothesis: H1 All increases in PRC exports to Kenya and South Africa always cooccur with decreases in US exports of the given product in the given year(s); The alternate hypothesis is as follows: H2 No decreases in PRC and US exports of the given product(s) in any given year(s) to the Kenya and to South Africa mutually occur. Contrary to the arguments put forth in substantial amounts in the literature (including in policy-oriented documents), the findings of the chapter point to the lack of a general replacement of the US by the PRC in the period between 2007 and 2017. There were, however, three incidences of the US being surpassed by the PRC in this period, with one being reversed once again, and two of the three being in the Kenyan case study. In the case of South Africa, the PRC briefly and temporarily surpassed the US as the principal import source of mineral fuels; this was in 2016, when PRC-sourced imports reached US$192.849-million, while those of

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the US were at US$137.234-million. However, in the following year, though PRC-sourced imports reached US$240.211-million, US-sourced imports seemed to have recovered from what had been a two-year slump to US$246.55-million. With Kenya, there have been two outcomes of PRC surpassing the US as the principal import source in the tail end of the datasets: in 2014 and in 2015, with textiles and chemical products, respectively. These have not been reversed. In the entire 2007–2017 timeframe, the Kenyan importing of these US-originated products observed some volatile patterns, with growths and declines, whereas imports from the PRC largely only grew. This means that on a year-on-year basis, there may be instances of mutual growth of US imports to Kenya with those of China, but on the decade-long timeframe, there has been an overall surpassing of the US by the PRC in these two products, which had originally been dominated by the US. Notably, then, there does appear to be an overall inverse correlation of US imports and Chinese imports. The exception here are Kenyan imports of textiles which observed this pattern in the entire 2012–2017 five-year period, with the US-sourced imports continuously declining with each successive year, while those from China continuously grew, with the exception of 2017, to the result that the PRC overtook the US in 2014. Instead, Chinese exporting of these products into Kenya appears to be as a result of growth in China’s own export volumes to Kenya, while those of the US have comparatively grown slower than those of the PRC. Another finding made, though not directly linked to the hypotheses, was that China not only overtook the US in what were two import sectors dominated by it in Kenya, but that it has also developed a differentiated and China-exclusive import market in which it is increasingly growing and which forms its third most critical import into Kenya but in which the US has virtually no import activity, locomotives and rail. This has a particular relevance and (all other things being equal) is likely to grow in the coming decade as the country is an important component of the Belt and Road Initiative, which is characterized by massive infrastructure rollouts, especially in rail. The second section of the chapter will consist of a literature review, surveying the body of work on the effects, outcomes, and dynamics of US and Chinese imports onto the continent, with particular reference to the two countries studied in this chapter, South Africa and Kenya, and the so-called new scramble for Africa. The third section will give an account of the methodology to be used in the chapter, along with a description

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of the dataset. The fourth will give an analysis of the data, noting some conclusions which can be reached on the basis of the data analyzed. The chapter then concludes.

6.2

Literature Review

This section of the chapter distils what the literature shows in terms of the China–Africa and US–Africa relations and, in particular, the impact of the former on the latter in terms of the import markets of African states in general, and South Africa and Kenya in particular. The literature review demonstrates and connects the ideas in the literature and situates the chapter’s aims within this larger body of work on these interacting relationships. This section will begin by identifying and summarizing the literature on the impact of the PRC on US-African trade relations, and will subsequently critically evaluate these ideas and lay out the vantage points which will form the basis of the chapter. A New Scramble for Africa? The US and China are increasingly [becoming] rivals on the world stage, competing over resources, policy and influence. One region where China has spent years establishing a foothold is Africa. Now the US is also keen to reassert itself after years of economic neglect. The US fired the latest salvo late last year [2014] when it pledged to provide at least US$14 billion in public and private assistance in areas such as clean energy, energy, aviation and banking. 3

This preceding assessment, contained in a World Economic Forum (WEF) report entitled “America and China’s Competition for Influence in Africa,” is not an isolated appraisal of the triangular nexus, nor is it the first example of literature in this fold. Both academic and gray literature of this tilt surrounds Africa’s relations with the US and the PRC, and the impact of these two interactions on one another. The relationship has been looked at through the prism of international aid, foreign direct 3 Ilunga, Yvan Yenda, ‘America and China’s Competition for Influence in Africa,’ World Economic Forum, February 27, 2015. Available at: https://www.weforum.org/ agenda/2015/02/america-and-chinas-competition-for-influence-in-africa/ (Last accessed: 29 December 2018).

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investment (FDI), and trade.4 On all three areas, an emergent consensus has been the so-called “new scramble for Africa,” of which the WEF report’s conclusions serve as an exemplar. While remnants of it can be found in the immediate post-Cold War era,5 this body of work found widespread acceptance in the early 2000s, driven by the rise of China generally, and the rise of China in Africa in particular. In his Rise and Fall of the Great Powers (1987), Paul Kennedy postulated that in any given world order (conceptualized effectively as a hierarchy-based balance with clear domination by one or two states over the rest of the states in the system), there is always the inevitable process of power shifts from the status quo power, to a new power or set of powers, who may hold revisionist positions (i.e., seek to reform the world order in their favor). Picking up from this, American scholars such as Hal Brands (2018a, 2018b), Graham Allison (2017) and Ivo H. Daalder and James M. Lindsay (2018) have emphasized the geostrategic dimension (measurable by the accumulation of allies and coalitions, as well as military bases around the world by each actor, among other indicators), while others (such as Dunaway [2009]; Grace [2018]; and Wallace [2018]) have paid attention to the economic dimension (i.e., the comparative gross domestic product [GDP], GDP growth rates, trade partners, among others) in this expected shift. To be sure, China’s speed of economic development has made it the second-largest economy in the world, surpassed only by the US in terms of GDP, and surpassing it in terms of purchasing power parity (PPP) since 2014 (Willige 2016). Overall, the pessimistic perspectives on the implications of the PRC’s rise for the US rest on two aspects, economic and geostrategic. These have found synthesis in scholars studying the impact of the rise of the PRC and the relationship that the US has with countries on the African continent. Among the perspectives to emerge from these works has been the characterization of Africa as a site of contestation between the two, with China being written up as an emerging or re-emerging player on the continent, especially active since the 2000s not only to advance its own economic reasons (for both minerals imports and for market access to the continent’s growing population), but also to

4 Frynas, Jedrzej George and Paulo, Manuel, ‘A New Scramble for African Oil? Historical, Political, and Business Perspectives,’ African Affairs, 106 (2006), pp. 229–251. 5 See Frynas and Paulo, ‘A New Scramble for African Oil?,’ p. 236.

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displace the US with whom it is said to be in direct or indirect competition (Naidu et al. 2009: 87). Sanusha Naidu and colleagues further add that “the margin by which China has deepened its footprint in Africa in a few short years has been unprecedented. Not only has the East Asian giant positioned itself with an overwhelming presence across the continent but it has also been interpreted as a countervailing force and at times seen as a competitor to the geo-strategic interests of Africa’s traditional development partners in the North.”6 In the pre-2008 economic crisis period, the continent was said to be “experiencing a ‘New Scramble’ thanks primarily to its oil and gas wealth, with the United States and the People’s Republic of China actively competing for access to Africa’s resources.”7 As early as 2004, The Economist magazine had used the term “A New Scramble” in an article about China’s business links with Africa (though it assessed the implications for France rather than the US).8 Indeed, oil “is one of the world’s most important strategic resources, and Africa has attracted a lot of attention among corporate and political decision-makers because of growing global oil demand” (Frynas and Paulo 2006: 230); but trade, which is the primary focus of this chapter, has also been claimed to be a site of competition: “One way in which China exercises influence internationally is through its large-scale bilateral and multilateral trade and investment regimes with countries throughout the world. This gives a growing number of states powerful incentives to continue cooperating with Beijing” (Katz 2018: 4). For Lyman (2005: 2), “China is a formidable competitor for both political influence and commercial advantage.” At the same time, “what is perhaps most striking is that while China has a fairly clear and comprehensive strategy for Africa, with significant implications for U.S. interests, the U.S. does not have a similarly comprehensive response” (Lyman 2005: 2). This co-mingling of politics and commerce is also noted by Xu (2008: 1124), who observes that the US and the PRC “compete for control over oil and other strategic resources, for markets, and for political influence” (Xu 2008: 1124). Xu 6 Naidu, Sanusha, Corkin, Lucy and Herman, Hayley, ‘China’s (Re)-Emerging Rela-

tions with Africa: Forging a New Consensus?,’ Politikon, 36:1 (2009), 87–115 (emphasis added). 7 Frynas and Paulo, ‘A New Scramble for African Oil?,’ p. 229. 8 The Economist , ‘China’s Business Links with Africa,’ November 25, 2004. Available

at: https://www.economist.com/business/2004/11/25/a-new-scramble (Last accessed: 31 July 2019).

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further argued in 2008 that the scenario then was to China’s favor: “The Chinese expansion in Africa will lock the US out of African resources and markets and endanger the US interests in the continent” (Xu 2008: 1124). In some ways, this is both an attempt at appraising the present, at projecting the future dynamics of the relations. But it is also a historiography. Beginning in the 1960s, “relations between Africa and China grew over a period of time, with periods of decline, such as the 1980s and 1990s during which China was more inwardly looking and less inclined to give out aid to the developing world.”9 But from its inception, “the relationship was characterized by a shared struggle against western hegemony, with China assisting Africa in three ways. They supported nationalist movements with arms to fight colonization; large construction projects were initiated such as the Tazara Railway, and China sent medical teams to Africa and provided scholarships for African students to study in China.”10 From the 1990s, the relationship tilted toward economics: “The approach became more pragmatic and economic development was clearly China’s priority. With an annual growth rate of 7%, the Chinese economy expanded enormously, and accessing natural resources became a priority. China had to broaden its horizons. Africa, with all its seemingly unlimited natural resources, was an ideal partner” (Ibid.). Also notable is the fact that “the African continent as a whole was a potential market for China’s low-value manufactured commodities.”11 This has especially picked up the speed after the 2008/9 global economic recession in which the US and the EU were particularly hard hit, while China maintained its positive growth pattern. Thus, Africa–China and Africa–US relations’ political and economic trends since these years are sometimes argued to have reached a turning point, as while the US was steeped in financial crisis, the PRC continued to trade with the continent of Africa and officially surpassed the US as the principal trade partner of the majority of the countries on the continent in aggregate terms. This coincided with the period in which Western mining corporations had begun “complaining about being cut out of deals on the .

9 Looy, Judith van de, Africa and China: A Strategic Partnership? ASC Working Paper 67, Leiden, The Netherlands: African Studies Centre (2006), p. 27. 10 Van de Looy, ‘Africa and China,’ p. 27. 11 Ibid.

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African continent by Chinese state-owned companies.”12 In 2015, the RAND Corporation, at the request of the US government “examine[d] how China’s rapidly growing engagement with African states affects the U.S. Army’s role on the continent,” and to “offe[r] policy recommendations for U.S. and Army leaders.”13 The report, written by Lloyd Thrall, was “sponsored by the Deputy Chief of Staff, G-8, U.S. Army.”14 In the report, Thrall concludes with a set of recommendations, including advising that “in economic diplomacy, opening (or reopening) U.S. Foreign Commercial Service offices in Africa may help match some of China’s expanded market share.”15 This indicates some zero-sum diagnoses of the situation in Africa as it advocates a set of policies or responses that would result in a matching of China’s market share in the continent. Furthermore, a US Congressional report published in 2013 contained the following passage: “Concern over competitive threats to U.S. government and business interests posed by burgeoning Chinese engagement in Africa has also fostered increased U.S. attention toward Africa.”16 Evidently, assumptions of competition are not only academic, but were also, at least in the Obama administration (incidentally the period of focus for this chapter), in the powerful legislative branch of the US government. But the validity of these assumptions still remains untested. As will have been noted in this section, this literature makes only general claims about “Africa,” but fails to make case-specific claims about particular countries. Inasmuch as they need to be put to the test, however, as a matter of practicality, these claims can only be assessed through few countries at a time. To this end, this chapter seeks to place the assumption of mutual exclusivity between the US and PRC import market access in Africa under empirical assessment. The chapter will use the case studies of South Africa 12 Melber, Henning, Europe and China in Africa: Common Interests and/or Different Approaches? Stockholm-Nacka, Sweden: Institute for Security and Development Policy, 2013. Available at: http://isdp.eu/content/uploads/publications/2013-melber-europeand-china-in-africa.pdf (Last accessed: 29 December 2018). 13 Thrall, Lloyd, ‘China’s Expanding African Relations: Implications for U.S. National Security’, RAND Corporation, 2015, p. ii. 14 Thrall, ‘China’s Expanding African Relations’, p. iii. 15 Thrall, ‘China’s Expanding African Relations’, p. 90. 16 Cook, Nicolas, South Africa: Politics, Economy, and U.S. Relations (Congressional

Research Service Report, Washinton, DC: Congressional Research Service, 2013), p. 24.

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and Kenya. It is worth reviewing these countries’ relations with both the US and the PRC so as to flesh out the case-specific factors before turning to the methodology applied to them in the chapter. These two countries could perhaps also offer generalizable insights of the countries which are at the same time large regional economies as well as meet the criteria and participated in the bilateral but qualified Africa-wide preferential trade access African Growth and Opportunity Act (AGOA) initiated by the US in the late 1990s, though the other countries also ought to be assessed in their own right, perhaps with modified variables. The choice of these two countries was governed by data availability; for example, there were some data paucities on Nigeria for specific years in the timeframe of interest such as 2014. The cases will not, therefore, be taken to be generalizable to the continent’s more than 50 countries, many of whom could have differentiated relations with both the US and China. Rather, the facts of these findings will be used to distil the extent to which the “new scramble for Africa” is true for at least these two countries, who are also the biggest economies in their respective regions and had had a certain class of goods, prior to 2008/9, comparatively sourced more from the US than China, but which subsequently saw a growth in Chinese-sourced imports in subsequent years. At the onset of the study, the countries studied here were within the top five African export destinations for US exports according to US International Trade Administration. “The top five African destinations for U.S. products were South Africa, Nigeria, Angola, Ethiopia, and Kenya” (Ndzendze 2018a: 1). In the same year, Africa as a whole was the origin of 5% of China’s imports and the destination of 4% of its total exports.17 Differences in results for each of these two countries could also be bases for further research on the underlying differences between them and therefore the findings could indicate the causes of the different states like them in typological fashion. South Africa and Kenya: Between the US and China? Since the advent of the democratic dispensation after the dismantling of Apartheid in 1994, South Africa positioned itself as a representative of the global south, while also pursuing economic growth through relations 17 South African Institute of International Affairs, The China–Africa Toolkit: A Resource for African Policymakers (Braamfontein, South Africa: South African Institute of International Affairs, 2009), p. 27.

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with the West. To the latter end, Pretoria “chose foreign policy that met the stringent criteria of Brenton Woods institutions,” with such measures as liberalizing its markets, privatizing certain sectors in the economy as well as corporate-friendly taxation levels.18 At the onset, “[the] relationship with the United States was…negatively impacted by the hangover of Cold War politics and the U.S.’s relationship with the apartheid government,” and indeed “the new government also considered Russia and other American enemies like Cuba, Iran and Libya allies.”19 Indeed, the South African government is argued to have “never fully trusted the U.S.’s intentions and was wary of agreeing too often with the country for fear of being called a puppet of the U.S.”20 Over time, however, owing to the personal rapport between Presidents Nelson Mandela and Bill Clinton “the two countries managed to find common ground and continue to trade with each other successfully.”21 Importantly, trade relations were always ahead of the political relations, which always tended to vacillate: Under the presidencies of both Mandela (1994-1999) and Thabo Mbeki (1999-2008) there was strong American enthusiasm for South Africa’s democratic breakthrough, but a number of policy differences surfaced between Pretoria and Washington to create tensions in the relationship. Under Mandela these included disputes over trade and aid, the future of peace operations in Africa, and South Africa’s close relationship with states the U.S. sought to isolate as “rogues”: Iran, Libya and Cuba. Under Mbeki the issues included differences over Zimbabwe, HIV/AIDS and the direction of then-U.S. President George W. Bush’s post-9/11 foreign policy, culminating in the 2003 U.S. invasion of Iraq, which South Africa strongly opposed. Consequently, the end of the Mbeki and Bush eras in 2008 provided the opportunity for an overhaul of the relationship under their successors.22

18 Saule, A., ‘The Impact of the United States (US) and South Africa’s (SA) Trade Relationship on Botswana, Lesotho, Namibia and Swaziland (BLNS) [1999–2013],’ (MA Thesis, University of the Witwatersrand, 2014), p. iii. 19 Ibid. 20 Ibid. 21 Ibid. 22 Saule, ‘The Impact of the United States (US) and South Africa’s (SA) Trade

Relationship on Botswana, Lesotho, Namibia and Swaziland (BLNS) [1999–2013],’ p. 1.

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But under Obama and Zuma in South Africa and the US, respectively, the economic relationship remained in general functional terms and, as will be seen, even registered new levels of trade in some sectors, “even if both administrations are consolidating the work of their predecessors rather than being particularly innovative.”23 Further, AGOA and the preferential access it accorded South Africa to the US market, meant that trade with the US along with its FDI maintains its role as a significant player in South Africa’s economic outlook. For example, by 2015, the approximated six hundred American corporations that operated in South Africa contributed to upwards of 10% of the country’s GDP and accounted for more than 200,000 South African jobs.24 Overall, since the year 2000, AGOA has similarly helped South African companies by offering duty-free access for more than 6000 products to the US. South Africa has seized the opportunity presented by AGOA to the benefit of a broad range of industries more than most of the countries on the continent. At the same time, however, South Africa has seen ever-increasing relations with the PRC. The countries are both members of BRICS, which South Africa joined at the invitation of China, joined the BRIC (Brazil, Russia, India, and China), a grouping of emerging economies who have at various points been portrayed as attempting to instill global reform, and an overhaul to the US-dominated global order through, for example, forming alternative financial institutions.25 Further, China emerged as South Africa’s principal trading partner (in both imports and exports) after 2009 (Cook 2013: 19). It is thus worth finding whether as China’s exports into South Africa have increased, they have done so at the expense of their US counterparts. If there is a common strand in cases of both countries, it must be their apparent tussling of relations with the PRC and the US, politically. For example, like South Africa, Kenya has had its moments of apparent disjuncture with the US. For example, “Kenya’s anti-ICC agenda has also 23 Ibid., p. 2. 24 Gaspard, Patrick H., ‘More than 600 US Companies are Invested in SA.” United

States Embassy in South Africa, 1,’ March 3, 2015. Available at: https://za.usemba ssy.gov/more-than-600-us-companies-are-invested-in-sa/ (Last accessed: 29 December 2018). 25 Stuenkel, Oliver, The BRICS and the Future of Global Order (Lanham, MD & London: Lexington Books, 2015), p. 147.

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been crafted around propaganda largely driven by the media, portraying [President] Uhuru [Kenyatta] and [Deputy President William] Ruto as victims of an imperialist agenda” upon being named to the court’s “wanted” list after the violence which surrounded the 2007 election.26 But can this be said to be the case economically? As seen, for many scholars, this is doubtlessly the case. Further some argue that “it has allowed African governments to manipulate their external partners and to use their growing leverage to play different foreign powers off against each other. It has provided African governments and private businesses with access to new sources of loans, credits, and other financial assistance as well as to new sources of development assistance. It has increased the market for African energy supplies and other resources.”27

6.3

Methodology

The following section will give a description of the methodology applied in the chapter, followed by a description of the data, and a subsequent testing of the hypothesis. The section ends with caveats (disclaimers) about the limited generalizability of the dataset assessed here regarding these two countries. The method of inquiry used in this chapter involves a “before/after” test which will see the US’ top three exports to each country from 2007, when it was the more voluminous importer, to 2017 be compared to those of the PRC. The marginal decline or growth rate of the US’s exports of all three will be traced along this time series, while also being compared to those of the PRC. The purpose will be to ascertain whether or not there is a correlation wherein the US’ exports decline as those of the PRC increase, and vice versa. Variables The independent variable in this study is the movement in South African and Kenyan imports of Chinese goods in what were US-dominated import sectors in 2007, whereas the dependent variable is the total 26 Ibid., p. 368. 27 Volman, Daniel, ‘China, India, Russia and the United States: The Scramble for

African Oil and the Militarization of the Continent,’ Current African Issues 43 (2009), p. 23.

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comparative imports into Kenya and South Africa between the US and China, specifically decrease or increase in US exports into these countries subsequent to increases or decreases in Chinese exports into the same markets. In this way, the dependent variable is operationalized as the total annual South African/Kenyan imports as measured in US dollars in the time-period. As the above description suggests, the chapter is characterized by an invariance on the independent variable, and variance on the dependent variable. The chapter therefore uses a most similar approach, in which two cases with similar independent variables are studied, but may yield different outcomes (i.e., in one country there could be a reverse correlation between the US and China’s exports into these sectors). Additionally, within the cases there is potential for variance, particularly among the three different products (i.e., there may be reverse correlation for one to two of the products, and none for the remainder). In addition to leading to results about each of the case studies, it also ensures against bias in selection of cases. The conditions for case selection in this chapter were but by these two countries since they both had nominally US-dominated markets in the relevant import sectors as at the first year of study. Additionally, as the literature review suggested, they have both had closer political and commercial relations with the US. The postulated causal mechanism in this study is the differentiated growth rates as well as China’s foreign policy in the 2000s, which has seen it increasingly trained toward Africa. The former is evinced by differential GDP growth rates of the two countries in the period, as represented in Table 6.1. The latter is seen in a number of initiatives undertaken by China which indicate at Africa’s importance to China. To begin with, China formed the Forum on China–Africa Cooperation (FOCAC), along with the growth in loans from the Chinese state-affiliated Chinese Development Bank (CDB) and the China Import–Export (Exxim) Bank. This growth in China– Africa relations is also captured in the fact that its trade relations with the countries on the continent have increasingly grown, increasing from US$10.6-billion in 2000 to US$170-billion in 2017 (McKinsey, 2015; MOFCOM, 2018). Further, Chinese interest in African countries has seen it eagerly pursue its One China policy on the continent, and forge relations with seven new states which had previously recognized Taiwan. These include Liberia (2003), Senegal (2005), Chad (2006), Malawi

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Table 6.1 GDP growth of China and the US 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Totals Average

PRC GDP growth rate (in %)

US GDP growth rate (in %)

14.2 9.6 9.2 10.6 9.5 7.9 7.8 7.3 6.9 6.7 6.9 96.6 8.78

4.59 −0.83 0.47 4.19 3.65 3.56 4.43 4.42 2.89 3.40 4.49 35.26 3.20

Sources US Bureau of Economic Analysis for data on the US and Knoema for data on the PRC.28 Averages calculated by authors

(2007), Gambia (2015), São Tomé and Príncipe (2016), and Burkina Faso (2018). These causal mechanisms, in combination, provide basis to postulate a growth in Chinese interest in the Chinese market. Further, the former, points toward a potential causal pathway through which China could be poised to enact a comparative advantage vis-à-vis the US in African markets. On the basis of this, the following conjecture is advanced: increases in PRC exports of given products in the given year(s) always correlate with decreases in US exports. From this, we postulate two mutually exclusive hypotheses: H1 All increases in PRC exports to Kenya and South Africa always cooccur with decreases in US exports of the given product in the given year(s); H2 No decreases in PRC and US exports of the given product(s) in any given year(s) to the Kenya and to South Africa mutually occur.

28 Available at: https://knoema.com/atlas/China/Real-GDP-growth (Last accessed: 8 December 2018).

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Caveats It is worth noting that the three products studied in this study are not the top three products which these African countries import. Neither are they necessarily the top three products which these countries import from the US or China. For South Africa, its three principal imports from China include electrical machinery and equipment (valued at US$4.048-billion in 2017), machinery and mechanical appliances (valued at US$ 3.002billion in 2017), and footwear (totaling US$ 522.948-milion in 2017), and from the US include machinery and mechanical appliances (valued at US$ 1.176-billion in 2017), aircraft and spacecraft (valued at US$ 510.904-million in 2017). The third product is one which also happens to match the criteria for being studied here; these are vehicles (valued at US$502.358-million at the end of 2017). For Kenya, the three principal imports from China include machinery and mechanical appliances (valued at US$757.301-million in 2017), electrical machinery and equipment (valued at US$633.807-million in 2017), and railway and tramway locomotives (valued at US$497.147-million in 2017) and from the US include machinery and mechanical appliances (valued at US$143.418million in 2017), electrical machinery and equipment (valued at US$ 65,708 in 2017), and aircraft and spacecraft (valued at US$ 58.323million in 2017). Subsequent growths or declines for these are not the subject of study in this chapter. Rather, those studied are products which at the first year of study (2007) were principally imported from the US by the respective African countries, and which subsequently saw growth in Chinese exports for at least a single year in the period.

6.4

Case Study Analyses

This section of the chapter analyzes the overall trends of annual imports from the US and the PRC to South Africa and Kenya. It does this through tabulating year-by-year import data from 2007 to 2017 and analyzes the movements (i.e., either growth or decreases) in total imports from both China and the US into South Africa and Kenya, respectively, and notes mutual or inverse movements for both these for all the years under study.

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Dataset Description The dataset is composed of imports by South Africa and Kenya across three import sectors which at least by 2007 were comparatively dominated by the US, but which have subsequently seen a growing PRC import activity. The data is derived from the International Trade Centre’s Trademap whose available database currently carries import and export data for all countries in the United Nations, ranging from 2001 to 2017 at the present.29 The dataset is corroborated by the World Bank, and the various government statistical offices, in this case the South African Department of Trade and Industry, the Kenyan Ministry of Industry, Trade and Cooperatives, the US International Trade Administration, and the Ministry of Commerce of the People’s Republic of China (MOFCOM). Country-Specific Data: South Africa In the case of South Africa, the top three US-dominated import markets as at the year 2007 were vehicles, mineral fuels, and medical equipment. The respective values and their subsequent growths or declines through to the year 2017 are summarized in Tables 6.2 (vehicles), 6.3 (mineral fuels), and 6.4 (medical equipment). The comparative movement of these is analyzed below. The US exports of vehicles into South Africa began at a baseline of US$701.669-million, and subsequently declined for the next two years, 2008 and 2009, in a row to US$615.486-million and US$406.850million, respectively. These then grew in 2010, 2011, and 2012 from US$604.07-million to US$898.618-million, and US$1.173.378-billion, which is also the peak for the dataset. From this high point, the imports declined in the following year, 2013, to US$830.128-million. 29 For South African imports from the US, see: https://www.trademap.org/Bilate ral_TS.aspx?nvpm=1%7c710%7c%7c842%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2% 7c1%7c1%7c1%7c1 and for South African imports from the PRC, see: https://www. trademap.org/Bilateral_TS.aspx?nvpm=1%7c710%7c%7c156%7c%7cTOTAL%7c%7c%7c2% 7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1. For Kenyan imports from the US, see: https:// www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c404%7c%7c156%7c%7cTOTAL%7c%7c% 7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1 and for Kenyan imports from the PRC, see: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c404%7c%7c842%7c%7cT OTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1. Both datasets (last accessed: 7 December 2018).

701,679 172,329

615,486 432,072

2008 406,850 380,101

2009 604,070 169,659

2010 898,618 351,462

2011 1,173,378 419,008

2012 830,128 483,679

2013 922,688 414,513

2014 683,531 392,521

2015

473,774 336,935

2016

502,358 278,898

2017

479,205 120,660

533,688 132,179

2008 456,950 121,933

2009 530,661 172,313

2010 566,251 213,381

2011 563,726 215,611

2012 541,375 240,987

2013

509,021 259,025

2014

490,544 253,971

2015

461,789 238,160

2016

457,731 285,765

2017

US PRC

179,353 102,468

2007

419,236 177,273

2008 226,923 70,227

2009 313,773 118,567

2010

609,521 93,384

2011

282,060 57,955

2012

253,384 130,773

2013

169,716 80,174

2014

196,247 71,491

2015

137,234 192,849

2016

246,055 240,211

2017

Table 6.4 Dataset of total annual South African imports of mineral fuels from the US and the PRC between 2007 and 2017 (in ‘000 of US$)

US PRC

2007

Table 6.3 Dataset of total annual South African imports of medical equipment from the US and the PRC between 2007 and 2017 (in ‘000 of US$)

US PRC

2007

Table 6.2 Dataset of total annual South African imports of vehicles from the US and the PRC between 2007 and 2017 (in ‘000 of US$) 6 UNITED STATES: AN IMAGINARY SCRAMBLE FOR MARKETS?

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Reaching US$922.688-million in 2014, these imports regrouped, but once again declined in 2015 and 2016; going to US$638.531-million and US$473.774-million, respectively. In 2017, there was a rebound to US$502.358-million. The US exports and PRC exports experienced inversely correlated growths in 2008 and 2013 with PRC exports growing while those of the US declined. Conversely, there was an inversely correlated growth in US exports and decline in PRC exports 2010, 2014, 2016, and 2017. Mutual growth did occur however in 2011 and 2012. Overall, then, there have been six non-continuous periods of inverse correlation, with two in the favor of the PRC, and three in that of the US. In 2007, South African imports of US medical equipment were valued at US$479.205-million, and grew to US$533.688-million the following year and declined to US$456.95-million in 2009. There was an increase to US$530.661-million in 2010, US$566.251-million in 2011. This was then followed by a decline, with US exports of medical equipment decreasing to US$563.726-million in 2012, US$541.375-million in 2013, US$509.021-million in 2014, US$490.544-million in 2015, US$461.789-million in 2016 and finally US$457.731-million in 2017. On the other hand, Chinese exports of medical equipment into South Africa increased in from a baseline of US$120.660-million in 2007 to US$132.179-million in 2008. There was a decline to US$121.933million in 2009. There was a continuous growth between 2010 and 2014, from US$172.313-million to US$259.025-million. 2015 and 2016 saw two years of consecutive decline, registering total values of US$253.971million and US$238.16-million, respectively. 2017 saw an increase to US$285.765-million. Co-occurrence of increase in Chinese and decrease in US exports to South Africa of medical equipment took place in 2012, 2013, 2014, and 2017, whereas no increases in US exports co-occurred with declines in Chinese exports. On the other hand, mutual declines occurred in 2009, 2015, 2016, and 2017. In 2007, South African imports of US medical equipment were valued at US$179.353-million and grew to US$419.236-milllion. This was followed by a decline in 2009 to US$226.923-million. There was a rebound to US$313.773-million in 2010 and US$609.521-million in 2011. Three consecutive years of decline followed in 2012, 2013, and 2014, reaching the all-time low within the dataset of US$169.716million in 2014. Recovery and decline occurred in 2015 and 2016, with

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imports reaching US$196.247-million and declining to US$137.234million, respectively. In 2017, the total value once again grew to US$246.055-million. With regard to Chinese exports, they grew to US$177.273-million from an initial US$102.468 in 2007. After declining to US$70.227 in 2009, the total imports increased to US$118.567million, before declining to US$93.384-million and US$57.955-million in 2012, respectively. In 2013, there was an increase to US$130.773million and a decrease to US$80.174-million in 2014, and US$71.491million in 2015. Growth occurred in 2016 and 2017, to US$192.849million and US$240.211-million, respectively. In this dataset, there was a co-occurrence between a growth in Chinese exports and decrease in US exports to South Africa in 2013 and 2016. On the other hand, co-occurrence between increases in US exports to South Africa and decreases in Chinese exports took place in 2011 and 2015. Mutual growth occurred in 2008, 2010, and 2017. Mutual declines occurred in 2009, 2012, and 2014. Country-Specific Data: Kenya In the case of Kenya, the top three US-dominated import markets as at the year 2007 were textiles, cereals, and chemical products. The respective values and their subsequent growths or decline through to the year 2017 are summarized in Tables 6.5 (textiles), 6.6 (cereals), and 6.7 (chemical products). The comparative movement of these is analyzed below. As at 2007, Kenya’s textiles imports from the US were worth US$8.884-million, whereas China’s imports were worth US$4.078million. In total, Kenyan textiles imports were worth US$88.56-million. Between 2007 and 2017, the US’ exports grew and peaked at 19.642million in 2010, and subsequently declined, reaching US$8.292-million, lower than their initial starting point. At the same time, despite declines Table 6.5 Dataset of total annual Kenyan imports of textiles from the US and the PRC between 2007 and 2017 (in ‘000 of US$) 2007 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US 8884 11,221 14,771 19,642 14,815 17,070 14,825 10,816 11,591 11,377 8292 PRC 4078 6675 5224 13,913 9728 17,838 13,540 18,208 46,158 41,526 61,691

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Table 6.6 Dataset of total annual Kenyan imports of cereals from the US and the PRC between 2007 and 2017 (in ‘000 of US$) 2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

US 27,026 15,498 96,816 26,523 12,042 17,016 19,917 32,324 23,679 38,130 47,208 PRC 8 23 83 4 5530 7526 43 364 85 215 27,807

Table 6.7 Dataset of total annual Kenyan imports of chemical products from the US and the PRC between 2007 and 2017 (in ‘000 of US$) 2007 2008 2009 2010

2011

2012

2013

2014

2015

2016

2017

US 6639 9981 8553 10,507 13,147 25,237 30,714 32,163 21,571 14,305 25,413 PRC 4249 5261 6749 9230 12,782 16,605 21,043 31,290 45,400 42,265 42,570

between 2008 and 2009, 2010 and 2011 and 2012 and 2013, Chinese exports have continuously grown, surpassing the US’ exports in 2012, after reaching US$17.838-million, despite declining to US$13.54-million in 2013, while those of the US had regressed to US$10.816-million. The PRC exports of textiles, continued to grow, reaching US$61.691-million. Thus, overall, the US’ exports would appear to reversely correlate with the increases in the PRC’s exports in 2011, and continuously between 2014 and 2017. Notably, when the PRC’s exports regressed after surpassing the US, those of the US were still declining. Kenyan imports of cereals from the US at the beginning of the dataset were valued at US$27.026-million, while those of the PRC were only at US$8,000. The US exports declined between 2007 and 2008 to US$15.498-million, but rebounded to US$96.816-million in 2009, before declining once again to US$26.523-million in 2010, and US$12.042-million in 2011. These exports recovered in 2012, and continuously grew through to 2017; reaching US$47.208-million. On the other hand, Chinese exports of cereals into Kenya grew to US$23,000 in 2008, and to US$83,000 in 2009, before declining to US$4,000 in 2010. These recovered in 2011 to US$5.530-million, and US$7.546million and declined to US$43,000 in 2013. An initial regrowth was seen in 2014 to US$364, 000, followed by another decline to US$215, 000. The exports recovered once again and reached an all-time high of

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US$27.807-million in 2017. Despite a present but minimal inverse correlation in 2007 and 2008—wherein Chinese exports grew whereas those of the US declined—and between 2010 and 2011, there were mutual growths in the period between 2011 and 2012, 2014 and 2015, and 2016 and 2017. Kenyan imports of chemical products from the US were valued at US$6.639-million, while those of the PRC were worth US$4.249million. Between US$2007 and 2008, Kenya increased its imports to US$9.981-billion before declining to US$8.553-million. Between 2010 and 2014, US exports of chemical products grew from US$10.507million to US$32.163-million. They declined between 2015 and 2016 to US$21.571-million and US$14.304-million, respectively. They recovered in 2015 to US$25.413-million. In the period between 2007 and 2017, Kenya’s imports of Chinese chemical products continuously grew, surpassing US exports in 2015 after reaching US$45.4-million, while those of the US regressed to US$21.571-million. Notably, US and PRC exports have mutually grown, as seen in the following periods: 2007–2008; 2010–2014; and in 2017.

6.5

Analysis of Findings

In this section we analyze the findings from the dataset in the preceding section of the chapter. We revisit each hypothesis for both of the African countries and assess the findings pertaining to both, and reach casespecific conclusions as presented by the data in terms of their implications for the mutual exclusivity assumption found in the literature when it comes to the US and PRC and their market access into African states. The datasets for both countries (South Africa and Kenya) make a total of 66 “incidences.” Incidences in this chapter are conceptualized as yearon-year shifts in which imports from either of the exporters could have either increased, decreased, or remained unmoved. As it happens, in none of the years was there an incidence of non-growth or non-decline for either of imports by the countries involved. For all the datasets, there were downward and upward movements for each year. As a comparative study, the hypothesis of the present chapter will be answerable by determining the contrast in the movements; either toward mutual or inverse growths and/or declines for both the importers—China and the US—in both the African states, as well as noting whether at the tail end of the study (2012

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to 2017), the US had been replaced by the PRC as the principal import source for the countries and products, and whether such as a surpassing was maintained (as at the end of the dataset in the year 2017). To be specific, the chapter postulated the following hypotheses: increases in PRC exports of the given products in the given year(s) always correlate with decreases in US exports. From this, we postulated two sub-hypotheses: H1 All increases in PRC exports to Kenya and South Africa always cooccur with decreases in US exports of the given product in the given year(s); H2 No decreases in PRC and US exports of the given product(s) in any given year(s) to Kenya and to South Africa mutually occur. The chapter will now turn to assessing the extent of the veracity of each, with the aim of concluding on the more accurate, if any. Hypothesis 1 The first hypothesis would be proven correct if the data yielded only results which showed inverse correlation between growths in the PRC exports of the product under study with declines in the US exports for that year. However, as seen, this has not been the case. To be sure, increases in Chinese exports have been negatively correlated with those of the US at different points, the most being sustained among these being seen in all the years in the 2012–2017 five-year period with regard to textiles. Findings to the contrary were made. In the case of South Africa, these were in all three sectors; seen in the vehicle imports in 2011 and 2012, in medical equipment imports in 2008 and 2010, and in mineral fuels in 2008, 2010, and 2017. For Kenya, the same results were seen; in 2008, 2010, and 2012 in textiles, in 2009, 2012, 2014, 2016, and 2017 for cereals, and in 2008, continuously between 2010 and 2014, and 2017 for chemical products imports. As seen in the data, these numbered to a total of 8 incidences for both South Africa and Kenya (bringing the sum total to 16, out of 66 incidences). Hypothesis 2 The second hypothesis, related to the first but broader, postulated that no decreases in PRC exports of the given product(s) in the given year(s) could mutually occur. In other words, we should not within a single year and for a similar product find instances of mutual decline for both the US and the PRC. Again, the data presents the opposite case, across different points in the dataset. As seen in Fig. 6.1, there

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PRC growth and US decrease

Kenya

8

Incidences of mutual 15 growth

8

6

9

Incidences of mutual decreases

2 6

US growth and PRC decrease

Fig. 6.1 South African and Kenyan imports from the US vs the PRC, 2007– 2017: Generalized incidence summary (Source Authors’ own calculations)

have been 6 such incidences for South Africa, and 2 for Kenya (total 8). At the same time, there have been 22 incidences of mutual and simultaneous decreases in US and PRC exports of all products, with 15 for Kenya and 8 for South Africa. Overall, mutual growth and mutual decline have occurred for a total of 38 times, out of a total of 66. In this case, the critical level is 33, with a score beneath this vindicating the hypothesis, and above it disproving the hypothesis. Since it is above 33, we can determine that the hypothesis is disproven (i.e., there is no overall inverse correlation between growth in PRC exports to South Africa and Kenya in the 2007–2017 period). This would appear to then indicate that there is no zero-sum scenario to be detected between US- and PRC-sourced imports, contrary to some of the literature and to the hypothesis laid out in the chapter. The extent of the validity of this, as well as the workings of this apparent finding, are further discussed in the section below.

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General Findings Discussed The findings of the chapter point to the lack of a general replacement of the US by the PRC in the period between 2007 and 2017. There were, however, three incidences of the US being surpassed by the PRC in this period, with one being reversed once again, and two of the three being in the Kenyan case study. In the case of South Africa, the PRC briefly and temporarily surpassed the US as the principal import source of mineral fuels; this was in 2016, when PRC-sourced imports reached US$192.849million, while those of the US were at US$137.234-million. However, in the following year, though PRC-sourced imports reached US$240.211million, US-sourced imports seemed to have recovered from what had been a two-year slump to US$246.55-million. With Kenya, there have been two outcomes of PRC surpassing the US as the principal import source in the tail end of the datasets: in 2014 and in 2015, with textiles and chemical products, respectively. These have not been reversed. In the timeframe, US exporting of these products has observed some volatile patterns, with growths and declines, whereas the PRC has largely grown. This means that on a year-on-year basis, there may be instances of mutual growth of US exports to Kenya with those of China, but on the decade-long timeframe, there has been an overall surpassing of the US by the PRC in these two products, which had originally been dominated by the US. Notably, then, there does not appear to be an overall inverse correlation between US exports and Chinese exports. The exception here, as indicated above, are Kenyan imports of textiles which observed this pattern in the entire 2012–2017 five-year period, with the US continuously declining with each successive year, while those of China continuously grew, with the exception of 2017, to the result that the PRC overtook the US in 2014. (Further, China not only overtook the US in what were import sectors dominated by it in Kenya, it also developed a differential market in which it is increasingly growing which forms its third most critical import into Kenya but in which the US has virtually no import access, locomotives and rail.) Nevertheless, Chinese exports of these products appear to be as a result of growth in China’s own export volumes to Kenya, while those of the US have comparatively grown slower than those of the PRC. Findings indicative of the US being sustainably surpassed by the PRC, as mentioned, have been true of two products. Four products have seen no sustained replacement of the US by the PRC as the principal importing

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source into the two countries. Among these, as well, the US has not maintained its position as the principal import source due to stagnation or regress of Chinese volumes. Rather the US has been less volatile and has grown at more sustained paces with regard to these products in the entire timeframe, including in the 2012–2017 tail end. The exception here would appear to be vehicle imports, where the PRC’s vehicle exports into South Africa have been on a downward spiral; since 2013, they have gone from US$483.679-million to US$278.898-million in 2017. Thus the US’s maintenance of primacy with regard to this product would appear to have been at the expense of China. However, it is crucial to note that the US has not been on a continuous growth path, and that it has had some incidence of decline with regard to this product. Moreover, these have at times coincided with declines of the PRC, notably in 2013, 2015, and 2016, highlighting the non-existence of a zero-sum scenario as both countries saw decreased exports to South Africa in these years. As Shilaho argues in a 2018 article on Kenya-China-US relations, for this country at least, there is no contradiction in close cooperation with both China and the West; “despite Kenya’s perceived shift to the East – a byword for China – the West still exerts significant influence over its domestic and international affairs. Besides the war on terrorism, the West exercises direct influence over Kenyan politics, as evidenced by US, British and EU interventions in the aftermath of the violently disputed 2007 presidential elections, and during the protracted 2017 electioneering period.”30 Ndzendze (2018a) has also conducted case study research on the effect of the war on terror between 2001 and 2016 in East Africa vis-à-vis the countries’ relations with the US and the PRC, with the hypothesis that the rather bellicose campaign led by the US alienated the country in Africa and gave way to the rise of China.31 The rationale stemmed from the cooccurrence of the war on terror with the spike in Chinese investment and trade within these years (exhibiting a consistent 40–20% growth for the 16-year period). It was found that, in fact, the US-led campaign may have 30 Shilaho, Westen, ‘Sino–Kenyan Co-operation: Whither the West?’ UJCI AfricaChina Policy Brief 5 (Johannesburg, South Africa: University of Johannesburg Confucius Institute, 2018), p. 3. 31 Ndzendze, Bhaso, ‘Implications of the US-led War on Terror for Africa-China Relations,’ UJCI Africa-China Occasional Paper 4, (Johannesburg, South Africa: University of Johannesburg Confucius Institute, 2018).

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made Djibouti, Kenya, and Uganda marginally safer for Chinese investment to be secured and for more influxes to be incentivized. Thus, the two states played complimentary roles. But in scholars (and just as importantly policymakers) not realizing the lack of a mutual exclusive scenario, the relations between African states and China run the risk of being excessively looked at through the prism of comparison. While comparative analysis is a crucial method in social science scholarship, it itself relies heavily on the correct understanding of cases individually first, which may then be subsequently deployed in cross-case comparisons. Thus, at least for Kenya and South Africa, the data indicates the need to look beyond mutual exclusivity.

6.6

Conclusion

Using the case studies of South Africa and Kenya between 2007 and 2017 in a simplistic hypothesis test, this chapter sought to identify whether there is any validity to the notion (sometimes labelled “a new scramble for Africa”) that as Chinese exports into the African continent increased, they were directly correlated with a decrease in US exports of the same products. Empirical evidence of a negative effect of increases in PRC exports on their American counterparts into these two African states studied were found lacking, as it would appear that there is no zero-sum game to be spoken of, despite the prevalence of literature claiming it to exist in Africa generally.

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Foreign Affairs, November/December. https://www.foreignaffairs.com/art icles/2018-09-30/committee-save-world-order. Dunaway, Steven. 2009. The U.S.-China Economic Relationship: Separating Facts from Myths. Council on Foreign Relations, November 13. https://www.cfr.org/expert-brief/us-china-economic-relationship-separa ting-facts-myths. (Last accessed: 29 December 2018). Frynas, Jedrzej George, and Manuel Paulo. 2006. A New Scramble for African Oil? Historical, Political, and Business Perspectives. African Affairs 106: 229– 251. Grace, Abigail. 2018. China and America May Be Forging a New Economic Order. The Atlantic, September 20. Available at: https://www.theatlantic. com/international/archive/2018/09/china-trade-war-trump/570880/ (Last accessed: 29 December 2018). Katz, Mark N. 2018. Great Powers in the Twenty-first Century. Horizons 10 (1): 122–133. Kennedy, Paul. 1987. The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000. New York City: Vintage. Lyman, Princeton. 2005. China and the US in Africa: A Strategic Competition or an Opportunity for Coopeeration? Council on Foreign Relations. https:// www.cfr.org/content/thinktank/ChinaandUS_Africa.pdf (Last accessed: 14 November 2018). Naidu, Sanusha, Lucy Corkin, and Hayley Herman. 2009. China’s (Re)Emerging Relations with Africa: Forging a New Consensus? Politikon 36 (1): 87–115. Ndzendze, Bhaso. 2018a. BRICS Members’ Low Investment in JSE Points to Limited Economic Ties. Business Day, July. Retrieved February 22, 2019 from https://www.businesslive.co.za/bd/opinion/2018-07-24brics-members-low-investment-in-jse-points-to-limited-economic-ties/ (Last accessed: 5 March 2019). Ndzendze, Bhaso. 2018b. Implications of the US-Led War on Terror for AfricaChina Relations. UJCI Africa-China Occasional Paper No. 4. Wallace, Charles. 2018. Trade War Hurts China While U.S. Economy Booms. Forbes, July 31. Available at: https://www.forbes.com/sites/charleswalla ce1/2018/07/31/trade-war-hurts-china-while-u-s-economy-booms/#4f3 a4c575b64 (Last accessed: 29 December 2018). Willige, Andrea. 2016. The World’s Top Economy: The US vs China in Five Charts. World Economic Forum, December 5. Available at: https://www.wef orum.org/agenda/2016/12/the-world-s-top-economy-the-us-vs-china-infive-charts/. (Last accessed: 29 December 2018). Xu, Y.C. 2008. The Competition for Oil and Gas in Africa. Energy & Environment 19 (8): 1207–1226.

CHAPTER 7

The European Union: Brexit Aftermaths and Divergent Futures

7.1

Introduction

The period between 2000 and 2007 saw an exponential increase in China–Africa economic ties, which have subsequently grown in the decade since. These economic relations were especially heightened after the 2008 financial crisis. Overall, China–Africa trade grew by an average of 20% per year to US$188-billion in the period between 2007 and 2017, with imports and exports more or less growing at the same pace, while Chinese foreign direct investment (FDI) into Africa grew by 40% in the same timeframe (Ndzendze 2019: 41). On the other hand, Europe was hit by the Great Recession, with economic growth declining in 2009 and 2012 and its gross domestic product growing on average by 0.982% while that of the People’s Republic of China (PRC) grew by 8.597% in the same timeframe (see Table 7.1). While the European Union (EU) accounts for a quarter of South Africa’s total trade in contemporary terms, the number was higher at 40% in 2004 (Venter and Neuland 2004: 308), whereas China’s was lower and has been growing continuously from 7.6% in 2004 to 18% by 2018 (MIT 2020a, b). Further, and perhaps because of these two inversely correlated trends, a litany of literature argues that due to historical and geostrategic reasons, the two entities are engaged in a state of competition with one another. Both actors are arguably capable

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_7

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Table 7.1 PRC and EU GDP growth rates, 2007–2018

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Totals Average

PRC GDP growth rate (in %)

European Union GDP growth rate (in %)

14.2 9.6 9.2 10.6 9.5 7.9 7.8 7.3 6.9 6.7 6.9 6.567 103.16 8.597

3.049 0.516 −4.315 2.168 1.791 −0.423 0.265 1.739 2.353 0.039 2.598 2.015 11.795 0.982

GDP growths of the PRC and the EU in the 2007–2018 period. Sources World Bank (https:// data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=EU-CN and https://data.worldbank. org/indicator/NY.GDP.MKTP.KD.ZG?locations=EU). Averages calculated by author

of instrumentalizing their aid tethers to gain access to the African countries’ resources (Van Wyk 2018: 497; Okolo 2015: 32), as well as access to their import markets in somewhat of a zero-sum game. Against the background of literature that assumes mutual exclusivity of European and Chinese access to African markets, this chapter conducted an assessment of the EU (without Croatia as the country joined the supranational body in 2013, and the study begins in 2007) and China’s exports to South Africa to test a hypothesis of mutual growth and declines against inversely correlated growths and declines over the 2007–2018 period. Specifically, the following hypotheses were tested: H1 All increases in PRC exports to the given country co-occur with decreases in EU exports of the given product in the given year(s); H2 No decreases in PRC and EU exports of the given product(s) to the given country in any given year(s) can mutually occur. The products traced for were those which had originally been principally dominated by the EU but which were subsequently overtaken by the PRC. These products were electric machinery and ceramic products. The

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research question, in this regard, was whether there were more incidences of mutual movement (either growth or decline) or inverse correlation. Findings indicate that EU exports of electrical machinery grew by a total of −20.798% overall, at 1.89% per year, whereas their Chinese counterparts grew by a total of 122.65% at a rate of 11.15% per year. On the other hand, EU exports of ceramic products grew by a total of 16.55% at a rate of 1.5% per year, while their Chinese counterparts grew by a total of 134.86% at a rate of 12.26%. In terms of correlations, which could be positive (at close to 1) or inverse (at close to −1), South African changes in annual imports from both the EU and the PRC were correlated as follows: electrical machinery was correlated at 0.6547 and ceramic products were inversely correlated at −0.2776. This indicates a moderate effect on both ends. However, total EU and PRC exports to South Africa grew mutually, with a 0.8407 correlation score, indicating more years of mutual growth than inversely correlated growth. However, the trend has been greater growth for the PRC than the EU; at 8.81% per year for China, and 1.23% per year for the EU. The onset of Brexit, with the UK being a key trade partner for South Africa within the EU, will expedite this trend by diminishing the gap between EU and PRC exports to South Africa. That is, if we assume that the post-Brexit EU exports to South Africa will grow by 1.2% as they previously have, then we can deduce that, ceteris paribus, they will grow from US$25.273-billion to US$28.716-billion by 2031. On the other hand, Chinese exports, if they continue their growth trajectory of 96.966% observed over the 11-year period studied here will grow to US$32.17-billion by 2031. Even the inclusive EU total, ceteris paribus, would be US$31.86-billion in the same timeframe. The second section of the chapter will give a brief literature review, surveying the body of work on the effects, outcomes, and dynamics of EU and Chinese relations with Africa and South Africa in particular, and some of the literature which has emerged arguing that the two entities are engaged in competition for influence and sustainability at each other’s expense. The third section will give an account of the methodology to be used in the chapter, followed by a description of the dataset in the fourth section. The fifth will give an analysis of the data. The sixth section will subsequently note some insights and possible implications which can be reached on the basis of the data analyzed. The chapter then concludes by noting some areas for further study.

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7.2

Literature

The relations between the EU and South Africa are based on the Trade, Development and Cooperation Agreement (TDCA). The TDCA covers 3 pillars, including trade, development aid, and cooperation in economic and social cooperation. “The significance of the special and reinforced relationship between the EU and SA was consolidated with the establishment of a Strategic Partnership signed in 2007, one of the ten in the World and the only one the EU has with an African country” (EU Commission Directorate-General for International Cooperation and Development 2020). The purpose of this Strategic Partnership status is to bolster “political dialogue” as well as “pursue strategic cooperation and shared objectives with regard to regional, African and global issues on the one hand, and stronger policy dialogue and sectoral cooperation” (EU Commission Directorate-General for International Cooperation and Development 2020). The Strategic Partnership also serves as a mechanism for annual summits between the two entities (Van Wyk 2018: 497). Economically, the EU is South Africa’s principal trade and investment partner, representing some 25% of its trade and 75% of its FDI. This results in direct employment of an estimated 500, 000 people (Delegation of the European Union to South Africa 2018: 1). Nevertheless, this number used to be higher, with European exports to South Africa accounting for 40% of its imports, and 30% of its exports (Venter and Neuland 2004: 308). It was against this background that the authors argued concluded their 2004 book The European Union and South Africa, by noting that “the EU-South Africa relationship is sound and flourishing” (p. 308). In a 2019 EU–South Africa investment summit, EU Ambassador to South Africa, Riina Kionka, sought to convey the same mood, observing that “the European Union has been a stable and resilient partner of South Africa through the toughest times. While South African exports in 2018 have decreased by 3.1% overall, due mainly to strong declines in the US (-3.5 percent) and China (-9 percent), South Africa’s exports to the EU have increased by 2.8 percent. This comprises almost one quarter of this country’s total exports. This is a testament to our preferential agreement, the Economic Partnership Agreement (EPA), which provides stability and predictability to our trading and business environment and is an anchor for our investment decisions” (in Business Report, 2019; October).

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We have already seen in Chapter 1 that South Africa’s foreign policy, took a new, East-leaning path from 1994 so that greater attention was given to China. For its part, the South African government would like to think of both players as important to its economic growth. South African president Cyril Ramaphosa’s strong commitment to building a new social compact around investment makes the EU and China both central to its economic diplomacy; as without FDI “the country cannot grow above 2%, as National Treasury has systematically warned,” floating a new investment target of US$100-billion between 2019 and 2024 (Business Report, 2019). It is evidently not lost on Brussels that China’s growth trajectory is exponential and could at some point rival its own. “Since the early 2000s the African continent has become an increasingly important arena for both traditional donors including the EU and emerging powers including China” (Hooijmaaijers 2018: 443). This coincided with China’s growing GDP, and its trade and overseas investment, and not necessarily as part of a grand plan to oust the West (Wissenbach 2011). But growth carries many implications, regardless of intentions. Graham Allison’s semi-deterministic argument in his 2017 opus Destined for War: Can America and China Escape Thucydides’s Trap? is based on this assumption. As he words it: “intentions aside, when a rising power threatens to displace a ruling power, the resulting structural stress makes a violent clash the rule, not the exception” (Allison 2017: xv). China’s own growth came as a shock to the leaders of the EU, “suggesting that they failed to respond to China’s rise as an emerging donor in Africa” (Wissenbach 2011). Shock was followed by reaction, however. “To deal with the increasing presence of China on the African continent, eventually in October 2008 the [European] Commission launched the EU-China-Africa trilateral cooperation initiative. However, no concrete joint development projects have so far seen the light” (Hooijmaaijers 2018: 444). It perhaps is because of this kind of thin evidence for cooperation between China and Europe on the continent that observers of both actors see them as being locked in competition, particularly over Africa (Carbone 2011: 203; Schneidman and Wiegert 2018). Europe too is arguably a site of contestation between China and the EU: China, it seems, has big plans in Europe. After a six-day jaunt through Italy, Monaco, and France, Chinese President Xi Jinping walked away with an agreement from the Italian government to join China’s massive global

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economic project, the Belt and Road Initiative. Washington and Brussels were furious. Earlier that month, the European Union had published its new China strategy, which characterized China as a “systemic rival.” At an EU-China summit scheduled for April 9, all these tensions may come to a head. (Maçães 2019: 1)

In 2014, the year after Belt and Road Initiative was launched, the EU launched its own “infrastructure stimulus plan” and was eager for Chinese participation in the projects. Currently, however, some argue that Europe is “doing nearly everything it can to keep the money out…[in 2019] the EU even shoved through a new, tougher screening mechanism to make it harder for Chinese investment to flow in” (Maçães 2019: 1). This was in reference to an initiative by the German, French, and previous Italian governments, who had issued a letter “requesting the European Commission redraw the rules on foreign investment in the EU” due to “concerns in the EU that Chinese foreign direct investment (FDI) has an underlying political motive were intensified just before the letter was submitted, with 2016 seeing the largest amount of Chinese FDI in the EU ever—17 times the amount received in 2010” (Percy 2019, May 2). The complex relationship between the two entities has led to numerous studies. For example, noting that “embracing theoretical perspectives on EU foreign policy (EUFP) making contributes to a better understanding of its complicated policy-making process,” Hooijmaajers (2018: 444) makes the case for “incorporating multiple conceptual lenses.” Particularly, the study “demonstrates that institutionalism contributes to a better understanding of every distinct stage of the policy process regarding the EU-China-Africa trilateral cooperation initiative. Aspects of neorealism illuminate some stages of the policy process as well, while BPM [bureaucratic process model] is only applicable to a limited degree” (Hooijmaaijers 2018: 443).

7.3

Methods

The following chapter tested a hypothesis postulating that increases in People’s Republic of China’s exports of given products to South Africa in any given year(s) between 2007 and 2018 would always correlate with decreases in EU exports (excluding Croatia as the country joined the

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EU in 2013, and the study begins in 2007). Each country’s product set was chosen on the basis of the products being primarily imported from the EU in the initial year of study, and subsequently seeing Chinese growth between then and 2017. The research question, in this regard, was: are there were more incidences of mutual movement (either growth or decline) or inverse correlation? The data was sourced from a publicly available dataset produced and annually curated by the United Nations and the World Bank. The postulated causal mechanism in this study are the differentiated growth rates of the EU and China as well as China’s foreign policy in the 2000s, which has seen it increasingly trained toward Africa. The former is evinced by differential GDP growth rates of the two countries in the period, as represented in Table 7.1. These causal mechanisms, in combination, provide basis to postulate a growth in Chinese interest in the Chinese market. Further, the former points toward a potential causal pathway through which China could be poised to extract a comparative advantage vis-à-vis the EU in African markets for growth (in relative terms). Caveats It is worth noting that the two products studied in this study are not necessarily the top two products which these countries export to South Africa. Neither are they necessarily the top products which South Africa imported from the EU or China. Instead, its three principal imports from China included electrical machinery and equipment (valued at US$3.060-billion in 2018), machinery and mechanical appliances (valued at US$2.326-billion in 2018), and furniture (totaling US$813.8-milion in 2018), and from the EU these were machinery (valued at US$5.719billion in 2018), vehicles other than railway or tramway rolling stock, and parts and accessories thereof (valued at US$5.196-billion in 2018). The third product set included electrical machinery (valued at US$2.643billion in 2018). This product also happens to match the criteria for being studied here (i.e., having been principally exported by the EU and subsequently being surpassed by China).

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7.4

Data

This section introduces and graphically represents the dataset to be utilized to test the hypotheses. Figure 7.1 represents EU and Chinese exports to South Africa over the 2007–2018 period. At the beginning of the set, EU exports started at US$27.983 billion, peaked at US$36.55-billion in 2011. By 2018, the exports were at US$28.048. On the other hand, Chinese exports began at US$7.444 and continued to grow until 2014, recovered once more from 2015, declined again in 2016 and grew to their peak of US$16.337 in 2018. Interestingly, the EU’s exports to South Africa had a negative growth of −5.049% between 2013 and 2014, when Croatia joined and expanded the EU. Additionally, in 2016, the year of the Brexit referendum, there was a decline of −9.28% in EU exports to South Africa. However, Chinese exports saw an even larger decline of −18.96%. Figure 7.2 represents the data on EU and PRC exports of electrical machinery exports to South Africa over the 2007–2018 period. EU exports started at a base of US$3.667-billion in 2007, grew and peaked at US$3.906-billion in 2011, and subsequently declined each year to their 2018 (and dataset) low of US$2.643-billion. On the other hand, PRC exports of the same product set to South Africa began at US$1.223-billion in 2007, and grew each consecutive year until 40 35 30 25 20 15 10 5 0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EU 27.983 30.945 22.52 28.458 36.55 33.607 32.342 30.709 27.623 25.058 27.164 28.048 PRC 7.444 8.617 7.365 10.799 13.362 15.323 16.83 15.699 15.857 12.849 14.808 16.337

Years EU

PRC

Fig. 7.1 Total exports to South Africa (in billions of US$) (Data sourced from UN Trade Map)

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4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 EU PRC

2007 3.667 1.223

2008 3.654 1.688

2009 2.673 1.311

2010 3.113 1.99

2011 3.906 2.221

2012 3.609 2.076 EU

2013 3.685 2.989

2014 2.908 2.856

2015 2.929 3.031

2016 2.632 2.448

2017 2.626 2.806

2018 2.643 3.06

PRC

Fig. 7.2 Electrical machinery exports to South Africa (in billions of US$) (Data sourced from UN Trade Map) 0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0

2007 EU 0.174 PRC 0.107

2008 0.216 0.115

2009 0.182 0.133

2010 0.181 0.178

2011 0.224 0.208

2012 0.158 0.351 EU

2013 0.173 0.413

2014 0.193 0.275

2015 0.166 0.261

2016 0.138 0.216

2017 0.147 0.237

2018 0.173 0.286

PRC

Fig. 7.3 Ceramic products to South Africa (in billions of US$) (Data sourced from UN Trade Map)

peaking at US$3.031-billion in 2015. The exports then once again started recovering from 2016 onward and closed at US$3.06-billion by 2018. Figure 7.3 represents the data on EU and PRC exports of electrical machinery exports to South Africa over the 2007–2018 period. EU exports started at a base of US$0.174-billion in 2007, and grew to US$0.216-billion in 2008, before declining in 2009 and 2010, and once

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again in 2012, and from 2015 to 2016. Afterward, the exports recovered in 2017 and 2018, closing at US$0.173-billion in 2018. On the other hand, PRC exports grew from an initial base of US$0.107 and grew to overtake their EU counterparts in 2012. For their part, Chinese exports went through declines from 2014 to 2016, and saw a recovery from 2017 onward (closing at US$0.286-billion by 2018).

7.5

Analysis

This section assesses the outcomes for each product set by converting each year-on-year growth/decline into percentages and then conducting a regression analysis (where the overall score should be closer to –1 if the two exporters have grown at each other’s expense and closer to 1 if their growth is mutual). Electrical Machinery For exports of electrical machinery, we find that the value of R is 0.6547. This indicates a moderate positive correlation; there is a tendency for high EU exports to South Africa to coincide with PRC exports to South Africa, and vice versa. The same holds for decreases of the same product. The p-value is .02087, and thus the result is significant at p < .05 (Fig. 7.4). 60 50 40 30 20 10 0 -10

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

-20 -30 -40 EU

PRC

Fig. 7.4 Changes in exports of electrical machinery to South Africa (in %), 2007–2018 (Data sourced from UN Trade Map. Calculations by author)

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80 60 40 20 0 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

-20 -40 EU

PRC

Fig. 7.5 Changes in exports of ceramic products to South Africa (in %), 2007– 2018 (Data sourced from UN Trade Map. Calculations by author)

Ceramic Products For exports of electrical machinery, we find that the value of R is –0.2776. Although technically a negative correlation, the relationship between the two export volumes is only weak. Further, the p-value is .383417 and thus the relationship is not significant at p < .05 (Fig. 7.5). Total Exports In terms of total exports to South Africa by both the EU and the PRC, the value of R is 0.8407. This is a strong positive correlation, which indicates that high scores of EU exports go with high PRC exports and vice versa. The p-value is .000614 and thus the result is significant at p < .05 (Fig. 7.6).

7.6

Discussion: Findings and Implications

For the first hypothesis (all increases in PRC exports to the given country co-occur with decreases in EU exports of the given product in the given year(s)), we find that there were no such occurrences for electrical machinery, but 7 for ceramic products (2008, 2009, 2011, 2012, 2013, 2014, and 2015) all but one (i.e., in 2011) of which were in favor

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60 50 40 30 20 10 0 -10

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

-20 -30 -40 EU

PRC

Fig. 7.6 Changes in total annual exports to South Africa (in %), 2007–2018 (Data sourced from UN Trade Map. Calculations by author)

of China. On the more threshold-sensitive second hypothesis (i.e., no decreases in PRC and EU exports of the given product(s) to the given country in any given year(s) can mutually occur), we find that since there were incidents of mutual decline (in 2008, 2009, and 2012 overall), it does not hold. Therefore, we can conclude that the exports have no direct effect on one another and growth for Chinese exports into South Africa does not necessarily mean decline for the EU’s own. Findings indicate that EU exports of electrical machinery grew by a total of −20.798% overall, at 1.89% per year, whereas their Chinese counterparts grew by a total of 122.65% at a rate of 11.15% per year. On the other hand, EU exports of ceramic products grew by a total of 16.55% at a rate of 1.5% per year, while their Chinese counterparts grew by a total of 134.86% at a rate of 12.26%. In terms of correlations, which could be positive (at close to 1) or inverse (at close to −1), South African changes in annual imports from both the EU and the PRC were correlated as follows: electrical machinery was correlated at 0.6547 and ceramic products were inversely correlated at −0.2776. This indicates a moderate effect on both ends. However, total EU and PRC exports to South Africa grew mutually, with a 0.8407 correlation score, indicating more years of mutual growth than negative. However, the trend has been greater growth for the PRC than the EU; at 8.81% per year for China, and 1.23% per year for the EU.

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Findings indicate a number of implications. Firstly, it is foreseeable that Chinese exports to South Africa have not supplanted total EU exports to South Africa, unlike with the country’s other previous trade partners (particularly the US, Japan and Taiwan and the individual EU countries, such as the UK and France); however, in this timeframe, its rate of growth has outgrown that of Europe, indicating that if the present trajectory continues, China will replace Europe as the principal export partner of South Africa. The onset of Brexit will also mean that the EU’s total weight of trade with South Africa (along with its total FDI) will be marginally decreased as Britain extricates itself from the supranational body. This is not an insignificant amount. In fact, when the UK is excluded from the EU total, its exports are reduced from US$28.048-billion to US$25.273billion. This decreases the gap between China and the EU-27’s exports to South Africa to less than US$10-billion. A second implication of the study is the necessity of considering the underlying aspects of the political relationship between South Africa and the two export partners since the question under consideration is South African purchases of either one’s exports. In this regard, the PRC would appear to have an advantage, due to the growing soft power of China among political elite in the country, including within the ranks of its governing African National Congress party. This is explored further in Chapter 8. But this is the essence of the observation: while China may already be garnering resentment and may increasingly so, the EU has more tangible and measurable advantage as it is the principal investor, with Chinese investment in South Africa being less than satisfactory according to many scholars, government officials and the Chinese Ambassador to South Africa (Fabricius 2019). On the other hand, the EU’s FDI advantage only carries relevance provided the supranational organization manages to maintain its cooperative behavior. This comes at a time when the EU is challenged both from the outside by Russia—as well as by the US—and from within by the likes of Britain and increasingly Hungary and Poland, under their populist, right-leaning governments. Furthermore, not operating in a global vacuum, the EU has arguably had to be more cognizant of the actions of other major players on the global stage. For example, Vassilis Ntousas argues that “amid an escalating Sino-American rivalry, there is a growing realization in Brussels that something has to change in the way the EU thinks and acts internationally” (Ntousas 2019; 3 December). Furthermore, the same author argues that “if the EU aspires to be a more assertive global player, it will

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need to grow comfortable with…compartmentalization. For example, if Brussels wants to stand up to Beijing regarding human rights, the South China Sea or issues of acquisition of European infrastructure, this should not mean that cooperation on areas such as peacekeeping, arms control or climate change needs to be blocked” (Ntousas 2019; 3 December). Ironically, among the PRC’s antagonists within the EU is the member state with which it is most economically linked within the collective; Germany: Starting around 2004, economic links between Germany and China had helped propel the German economy through one of its best periods in living memory, building a more stable international order in the process. A year later, the mood had already changed. Politicians and officials were starting to hear alarm bells coming from German industry. German companies were starting to feel the heat as their technological edge evaporated and they lost contracts to major Chinese competitor. (Maçães 2019)

The introduction of the Global Gateway by the EU in December 2021 is set to make the triangular relationship more competitive, with Africa as a salient site. For South Africa, the challenges and opportunities may come in balancing its pursuit of markets in commitments with both China and the EU as a collective, which also contains Germany, an EU member that also happens to be individually among South Africa’s top trade partners.

7.7

Conclusion

In conclusion, the study indicates a general lack of zero-sum game overall as the two exporters’ total exports into South Africa have no direct impact on one another. The findings of the chapter point to the lack of a general replacement of the EU by the PRC in all exports in the period between 2007 and 2018; however, the PRC did surpass the EU to become the principal exporter of electrical machinery (as of 2015) and ceramic products (as of 2012). This means that on a year-on-year basis, there were instances of mutual growth of European imports to South Africa with those of China, but on the decade-long timeframe, there has been an overall surpassing of the EU by the PRC in these specific products, which had originally been dominated by the EU. While EU presently accounts for a quarter of South Africa’s total trade in contemporary terms, this number had previously been higher, at 40% in 2004, whereas China’s was lower and has been growing continuously

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from 7.6% in 2004 to 18% by 2018 (MIT 2020a, b). This is an indication that if the present trajectory continues, China will replace Europe as the principal export partner of South Africa within little over a decade. The onset of Brexit, with the UK being a key trade partner for South Africa within the EU, will expedite this trend by diminishing the gap between EU and PRC exports to South Africa. That is, if we assume that the post-Brexit EU exports to South Africa will grow by 1.2% as they previously have, then we can deduce that, all other things being equal, they will grow from US$25.273-billion to US$28.716-billion by 2031. On the other hand, Chinese exports, if they continue their growth trajectory of 96.966% observed over the 11-year period studied here will grow to US$32.17-billion by 2031. Further studies could shine a light on the impact of Brexit on the differential access to the South African market between China and the EU, especially so given that the UK, in pursuit of “Global Britain,” could seek to gain a closer relationship with the PRC. There also remains a persistent need for a theoretical framing of the relationship that African countries has with the numerous and evidently widening number of external players on the continent, especially as the continent itself emerges and gains economic momentum. This will require empiricallybased accounts that move beyond the persistent narratives that give little to no agency to many African countries in their external relations; this is no longer the case, at least for many African countries such as Angola, Ethiopia (Arkebe and Lin 2019: 12) and South Africa (given its exclusive status as the EU’s only Strategic Partner in the continent). Typological models in this regard can illustrate the different impacts not only of the external partners but also how these are modulated by the circumstances on the continent.

References Allison, Graham. 2017. Destined for War: Can America and China Escape Thucydides’s Trap? Boston, MA: Houghton Mifflin Harcourt. Arkebe, Oqubay, and Justin Yifu Lin. 2019. Introduction. In China-Africa and an Economic Transformation, ed. Oqubay Arkebe and Justin Yifu Lin, 1–18. Oxford: Oxford University Press. Business Report. 2019. The European Union Pushes for an African Free Trade Agreement. Business Report, October 29. https://www.iol.co.za/business-

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report/economy/the-european-union-pushes-for-an-african-free-trade-agr eement-36239552 (Last accessed: 15 January 2020). Carbone, Maurizio. 2011. The European Union and China’s Rise in Africa: Competing Visions, External Coherence and Trilateral Cooperation. Journal of Contemporary African Studies 29 (2): 203–221. Delegation of the European Union to South Africa. 2018. European Union Discussion Paper on Investment in South Africa. Trade and Law Association. https://www.tralac.org/news/article/13488-european-union-discus sion-paper-on-investment-in-south-africa.html (Last accessed: 15 January 2020). Fabricius, Peter. 2019. Chinese Ambassador Spells out the Blunt Truths about Investment in South Africa. Daily Maverick. https://www.dailymaverick. co.za/article/2019-10-07-chinese-ambassador-spells-out-the-blunt-truthsabout-investment-in-south-africa/ (Last accessed: 15 January 2020). Hooijmaaijers, Bas. 2018. China’s Rise in Africa and the Response of the EU: A Theoretical Analysis of the EU-China-Africa Trilateral Cooperation Policy Initiative. Journal of European Integration 40 (4): 443–460. Maçães, Bruno. 2019. Europe Gets Its Competition With China All Wrong. Foreign Policy, April 3. Available at: https://foreignpolicy.com/2019/ 04/03/europe-gets-its-competition-with-china-all-wrong/ (Last accessed: 15 January 2020). MIT. 2020a. Where Does South Africa Import From? (2004). MIT Observatory of Economic Complexity. Available at: https://oec.world/en/visual ize/tree_map/sitc/import/zaf/show/all/2004/ (Last accessed: 16 January 2020). MIT. 2020b. Where Does South Africa Import From? (2018). MIT Observatory of Economic Complexity. Available at: https://oec.world/en/visual ize/tree_map/sitc/import/zaf/show/all/2018/ (Last accessed: 16 January 2020). Ndzendze, Bhaso. 2019. Is There a Reverse Correlation in Growth of Japanese and Chinese Exports to Africa? Evidence from South Africa, Kenya and Uganda, 2007–2017. Tamkang Journal of International Affairs 23 (2): 39–80. Ntousas, Vassilis. 2019. How Can the EU Learn the Language of Power? Chatham House. Available at: https://www.chathamhouse.org/expert/com ment/how-can-eu-learn-language-power (Last accessed: 2 January 2020). Okolo, Abutu Lawrence. 2015. China’s Foreign Policy Shift in Africa: From Non-Interference to Preponderance. International Journal of African Renaissance Studies—Multi-, Inter- and Transdisciplinarity 10 (2): 32–47. Percy, Joseph. 2019. Investment Screening in the EU: Impact on Chinese FDI. China Briefing, May 3. Available at: https://www.china-briefing.com/

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news/investment-screening-eu-impact-chinese-fdi/ (Last accessed: 16 January 2020). Ramani, Samuel. 2018. Can China Burnish Its Image in South Africa? The Diplomat, August 31. Available at: https://thediplomat.com/2018/08/canchina-burnish-its-image-in-south-africa/ (Last accessed: 2 November 2019). Van Wyk, Jo-Ansie. 2018. Sanctions and Summits: Sanctioned African Leaders and EU–Africa Summits. South African Journal of International Affairs 25 (4): 497–515. Venter, Dani and Ernst Neuland. 2004. The European Union and South Africa. Johannesburg: Richard Havenga and Associates. Wissenbach, Uwe. 2011. The EU, China and Africa: Working for Functional Cooperation? In China and the European Union in Africa. Partners or Competitors? ed. Jing Men and Benjamin Barton, 245–268. Farnham: Ashgate.

CHAPTER 8

The Politics and Future of Differentiated Engagement

The book’s findings, varied but indicative of some consistency across the case studies, carry a number of practical and theoretical implications that are worth unpacking. We turn first to the theoretical implications before turning to some policy-related observations. Theoretically, the pattern observed for South Africa seems to have carried true for the comparative case studies of fellow African countries over specific product classes. Policy implications indicate that the South African markets are very free and competitive, and it is impervious to the geostrategic competition. Indeed, what appears to matter most is consistency of supply and the country’s domestic purchasing capacity. Consistent with the theoretical findings, the recommendations made therefore take on board the notion that the Asian market can be penetrated, should the scope of what “east” entails be broadened beyond China and the other markets are sought after. This in turn informs the areas for further research, including South Korea, Singapore and Vietnam and the broader ASEAN. Encouragingly, there have been recent moves in this regard, with South Africa acceded to the Treaty of Amity of ASEAN on the 30th of September 2020. Linked to the broader liberalization of the two regions, this could unlock the potential of the two markets, and solidify the transition to a multipolar global economy into one of mutual pan-Africa and -Asian development.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4_8

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8.1

Theoretical Implications

The book has made numerous findings which can be distilled as follows. To begin with, there appears to be much value in the liberal notion of economic interdependence being an inhibitor of conflict. Indeed, that is the starting point of the book’s thesis; unable to fight each China in conventional war by virtue of their economic interdependence with it, the countries of Asia have had to engage in peaceable means of competition against each other. However, China is either winning (India, Japan, and the US) or has outright won (Taiwan). Secondly, and in relation to this, the findings appear to affirm the Ricardian notion of comparative advantage. Despite the self-conscious attempt to compete with China, it is not the case that each successive year is characterized by inverse correlations in exports to South Africa (or the other control countries studied alongside it). Rather, China appears to be “winning” because of its own niche areas and larger economies of scale. Further, China has no years of decline, which explains for why it has had a more consistent rate of exports to South Africa than India, Japan, and Taiwan—the latter two having had outright recessions in the wake of the 2008/2009 recession and some years thereafter.

8.2

Policy Implications

In a 2019 discussion I had with one of the AU’s foremost custodians of its foreign policy toward China, the concept of differentiated engagement came up. The argument seems to be that the African Union has a number of strategic partnerships with various extra-continental players (including countries, regional organizations, and institutions), all of whom are granted equal status and are approached in a general manner and that at the same time, however, Africa’s needs, as expressed in its strategy documents (most prominently in Agenda 2063), are specific and not all these partners are presently meeting these. Thus, the suggestion is to accord higher status and dedicate more resources to those that are already bearing fruit; in the present climate, this may as well be is code word for China. But this has already taken place in de facto terms, that has been the premise of the book. Furthermore, it has garnered resentment and will increasingly do so:

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The South African public’s skepticism about China’s intentions can be explained by two main factors. First, many South Africans believe that China interferes in their country’s internal affairs by providing financial assistance to the ANC. These suspicions surfaced after the 2009 national elections, when South African opposition parties accused the ANC of accepting campaign contributions from Chinese donors. These donations have been linked to South Africa’s unwillingness to criticize China’s human rights record in major multilateral forums like the African Union, the UN Security Council, and the G20. (Ramani 2018, August 31)

Secondly, the ANC’s critics believe that China’s model of governance has influenced South Africa in a negative way. During Zuma’s tenure as president of South Africa from 2009-2018, some opposition activists alleged that Zuma was modelling the ANC after the Chinese Communist Party (CCP) to prolong the party’s political hegemony. (Ramani 2018, August 31)

Such claims sprang up once more when the ruling party’s erstwhile Secretary General, Ace Magashule, stated on July 30th that the CCP would give training to ANC members prior to the then upcoming May 2019 national elections (Ramani 2018, August 31). The criticism was not only external, however, as after Magashule made his announcement, Fikile Mbalula, himself a member of the ANC national executive committee, claimed that through such a program “China was encouraging ANC members to engage in propaganda that is typically associated with authoritarian states” (Ramani 2018, August 31). Furthermore, “as Zuma was widely criticized for reducing government transparency and diluting the South African constitution to advance ANC interests, many South African civil society activists view the growth of Chinese influence over South Africa as a trigger for further democratic breakdown, and have become increasingly hostile toward Beijing” (Ramani 2018, August 31). The concept of differentiated engagement is also by its nature selfdefeating, for it is essentially reactionary and not transformative. Explicitly favoring the status quo, it is too revealing of one’s strategy and would, pursued to its logical conclusions, result in a lack of diversification of actual and potential partners short of new markets opening themselves to the continent’s exporters. For a continent eager to learn from China, it also bores no resemblance to the historical reality carried by that country’s example; Africa was once an unfavorable and un-obvious market

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to much of the globe, but China, going against the popular trends of the times and for its own continued growth trajectory, entered the markets. Moreover, it would have persuaded the country away from making constant overtures to the countries on the continent which recognized Taiwan.1 Indeed, China continues to pursue commercial deals in such hostile and volatile environments as South Sudan’s oil fields today. The benefit has been that while other global players have receded to their more hospitable relationships, China has become virtually the sole player in many markets; in addition to South Sudan we can also count Chad (oil),2 Sudan (oil), and Uganda (gold and oil exploration). Differentiated engagement would have encouraged sharpening the pre-existing relations rather than pursuing newer ones or consolidating loose-ended and even problematic ones. This begs the question then of how much is the fact of differentiated engagement dissuading attention from other sites of commercial engagement; what new markets are not being seen by South Africa, while it is being too focused on its traditional relationships, of which China must now be counted as a member. Such an examination requires both an inward and outward look. To be sure, the country boasts some of the busiest ports in the southern hemisphere, and the outright busiest in the sub-continent (Durban Harbour) when measured by volume. This is due to convenience of geography, but also prudential planning and innovation, especially in the early 2000s. The country’s 16 port terminals in its 7 commercial ports (Saldanha, Cape Town, Port Elizabeth, Ngqura, East London, Durban, and Richards Bay), work as a single system and are not in competition with one another being all ran by the Transnet Port Terminals state-owned company (one of 5 divisions

1 People’s Republic of China, ‘African Nations Without Diplomatic Ties with China

Invited as Observers to Beijing Summit,’ 2006, http://www.gov.cn/misc/200610/18/ content_417123.htm, 27 November 2018. 2 PRC-Chad economic relations have grown since the formation of diplomatic relations. Oil investments in particular underline the economic ties, ‘and is seen as the outstanding marker of China’s different approach in Chad compared with the French or US engagements, which had regarded this investment as unprofitable.’ In a matter of a few years, ‘China has developed into a major player, undertaking a distinctive departure from Chad’s previous experience of international oil investment, including N’Djamena’s previous troubled partnership with the World Bank over the Chad–Cameroon pipeline.’ See also Ndzendze, Bhaso (2019). ‘Realpolitik in the Africa-One China Nexus, 2001–2008: The Cases of Chad and Malawi,’ Studia Europaea (forthcoming).

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within Transnet as a whole). This also ensures that there are duplications in services. The opening of the Ngqura Trans-shipment Hub in 2012 has also ensured its place as a logistics hub for the southern African import– export market; it remains the only hub capable of handling containers of up to 12, 200 feet when fully laden.3 The ports in Saldanha Bay, Richards Bay, and Port Elizabeth also link the country’s minerals exporters to the rest of the world by having dedicated, specialized “pit-to-port” terminals that make use of a sophisticated network of rail and road infrastructure. Factory to vessel services also exist for automotive manufacturers and agricultural producers. In a 2018 survey by Global Infrastructure Investor Association, the country’s airports were scored third after India and Malaysia; South Africa’s score of 80 beat even the G8 average score of 65.4 Ngqura Port, which boasted a year-on-year 129% growth in volumes between 2011 and 2012, also won the 2012 and 2013 Drewry Maritime Research’s “Fastest Growing Container Terminal in the World” award category. The systems are therefore in place for expansion to novel markets. The question is on the health of the industrial base of the country. Indeed, in the same survey, the country’s energy score was only at 32 (p. 25), while 78% of respondents do not believe the country is “doing enough to meet our infrastructure needs” (p. 37). The country, much like China, has had experience in outright competition for markets vis-à-vis a potentially hostile region; this was how the oldest customs union in the world, the Southern African Customs Union (SACU) survived the apartheid years, when many of the other members—Botswana, Lesotho, Swaziland—had much reason to abrogate their commitments to the regional body (Alence 2007). Since the democratization of 1994, the present government, however, perceives exports only in economic terms, linking them to job creation and socio-economic growth. Nevertheless, the country has been a loss of connection between the industrial elite and the policy-creating government as well as a lack of creation of new industrial bases. At the same time, global competition, from the likes of China, has also depleted local industries. Thus, the growing relationship accounted and detailed in this book has not been without impact in the country; valueadded manufacturing went from having a 19.2% share of GDP in 1995 3 https://www.engineeringnews.co.za/article/established-industrialists-invest-in-newcapacity-accelerating-eastern-capes-economy-2019-09-19/rep_id:4136. 4 https://www.ipsos.com/sites/default/files/ct/news/documents/2018-11/global-inf rastructure-index-2018.pdf.

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to 12.01% by 2017, whereas overall growth in exports fell from 5.29% in 1997 to −0.7% in 2017. This has been concomitant with an overall decline in the growing pace of value-added manufacturing—crucial for a developing country as South Africa—from 2.7% in 1994 to 0.964 in 2018; this was following a decline in 2017 of −0.186 in 2017. The decline has been especially marked since the effects of the 2009 global recession; following a recovery in 2010, there has since been an almost uninterrupted decline (Table 8.1). This trend is also partially driven by reasons internal to South Africa, centered on its overall capacity for the attraction of FDI, which in turn depends on a multitude of other factors. In the 2009–2017 period, South Africa decreased its cost of starting a new business by 143.7% and saw increases of 79.8%. Figure 8.1 indicates an imperfect correlation between improvement in the Ease of Doing Business score for the country and new FDI; when it improves, there is a modest new growth in FDI, but when it declines, there is a marked decline in new FDI. It appears that the country at least has a perception problem; its pull factors are outweighed by its push factors. Investors also reportedly perceive the country’s labor environment as relatively unstable and costly. It would appear, then, that the country’s export capacity is at least driven by a combination of internal and external factors, among which China counts as one. Its motivations are in turn modulated by domestic and regional conditions touched on in this book. Table 8.1 Annual growth in South African value-added manufacturing, 2009–2018

Year

Annul growth in manufacturing (in %)

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

−10.62 5.9 3.03 2.09 1.01 0.3 −0.44 0.82 0.18 0.96

Source World Bank (2019). ‘Manufacturing, value added (annual % growth)—South Africa,’ World Bank. Available at: https://data.wor ldbank.org/indicator/NV.IND.MANF.KD.ZG?locations=ZA (Last accessed: 11 November 2019)

Movement (in %)

8 80 60 40 20 0 -20 0 -40 -60 -80 -100 -120

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Fig. 8.1 New FDI and Ease of Doing Business index score, 2009–2017 (Source Ndzendze, Bhaso, ‘World Bank “Doing Business” index scores and FDI influx: findings from four African countries, 2009–2017,’ Transnational Corporations Review, Forthcoming [2020])

8.3

Policy Observations

With the downsides of differentiated engagement having been discussed in the preceding section, it is worth assessing other avenues the country could explore in the Asia–Pacific region, which is after all experiencing growth. SA exports to PRC. In keeping with the theme of regional competition, it is worth looking at a state in the region which has a strategically tenuous relationship with China and is at the same time growing new markets. One such country is Vietnam, which is a developing Asian state that stands in many ways to be what China was to Japan in the 1990s and early 2000s. Indeed, the country has been gaining the attentions of South African policymakers. As part of their wider bilateral ties, Vietnam and South Africa share a defense relationship that was institutionalized during the inking of a memorandum of understanding back in 2006. The two sides have continued to work to develop this aspect of their relationship in various areas, including visits, exchanges, and dialogue mechanisms like the Vietnam-South Africa Defense Dialogue. (Parameswaran 2019, August 26)5 5 Parameswaran, Prashanth, ‘What’s Next for Vietnam-South Africa Military Ties?’ The Diplomat, August 26, 2019. Available at: https://thediplomat.com/2019/08/whatsnext-for-vietnam-south-africa-military-ties/ (Last accessed: 4 November 2019).

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Total annual imports (in millions of US$)

In 2019, Nosiviwe Mapisa-Nqakula, South Africa’s then Minister of Defence and Military Veterans “led a high-ranking defense delegation for an official visit to Vietnam that lasted from August 22 to August 26, which was billed by both sides as a way to boost momentum for the development of their defense relationship” (Parameswaran 2019, August 26).6 It is to be observed that these appear to be mainly security-minded overtures rather than commercial ones. However, South Africa’s exports to Vietnam have been on the rise (see Fig. 8.2). As Fig. 8.2 demonstrates, Vietnamese imports from South Africa have grown at a near-constant rate from US$5.073-million in 2001 to US$394.810-million by 2018. This indicates a growth of some 450 400 350 300 250 200 150 100 50 0 2000

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Fig. 8.2 Vietnamese imports from South Africa, 2001–2018 (Source TradeMap dataset [2019]7 )

6 “During the meeting, the two sides also discussed ways to boost defense collaboration more specifically. Per a statement released by Vietnam’s defense ministry on the visit, both sides agreed to further current areas of collaboration, including personnel training and exchanges in aspects such as English, science and technology, and computer science. They also discussed ways to advance cooperation in specific areas, which included military medicine, counterterrorism, peacekeeping, and telecommunications research, with the possibility of Vietnam’s military-run telecom group Viettel investing in South Africa” (Parameswaran 2019, August 26). 7 Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c704%7c% 7c710%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1 (Last accessed: 11 November 2019).

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7682.57%. Even for a lower base of growth, this is nonetheless remarkable growth, with further growth prospects; as recently as 2017–2018, it saw a growth of 62.9%. This trade consists of cereals, which grew from US$1.80-million in 2015 to US$159.740-million in 2018. South Korea is another country with a complex but milder relationship with China due to its proximity to the US, as well as at the behest of the North Korean relationship with whom China is politically closer. However, South Korea’s relationship with China does not appear to be competitive enough. In lack of geopolitical competition, necessity may be another motivating factor. Unlike India, Taiwan, and Japan, the history of relations between Korea and Africa does not cast a particularly long shadow as far as international relations go. This is easily explained by the fact that both entities, and both until the 1950s incidentally, were dominated by foreign occupiers—with Korea suffocated by Japan (and later a deadly civil war from 1950 to 1953) and Africa by Europe (with Ghana gaining its independence in 1957). In the subsequent years, Korea prioritized its alliance with the US in its pursuit for economic growth and military security—thereby going from one of the most economically disadvantaged countries to being among the most prosperous. And in the Cold War climate that characterized the subsequent years, there was a high level of sensitivity as many post-colonial African states honed relations with the Soviet Union and the PRC. Further, the communist inclinations of many African leaders meant that they had institutional aspirations that were closer to the Democratic People’s Republic of Korea in the north than to the south. Few exceptions are to be noted here. For example, the bilateral relationship between Ethiopia and South Korea dates back as far as the Korean War when Ethiopia sent its 6037 troops (the Kagnew Battalion) during the period 1951–1953. The South African government also participated on the South Korean side during this war. But these are minimal examples in an otherwise scant pattern of contact; with the rest of the twentieth century being characterized by relatively little cooperation between the two entities, going no further than the opening of formal diplomatic ties and consulates. But things have changed as of recent, as particularly in the previous decade and a half, South Korea has begun looking to Africa as an economic partner. The Korea–Africa Forum was established at the first ministerial-level Korea–Africa Forum, which was held in November 2006 in Seoul. Attracting over 7000 delegates in 2015, the Korea–Africa Forum has been largely understood as the two parties’ attempt to catalyze the

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relationship between themselves in trade, investment, and aid terms. Having held just four summits in over ten years, and president Park of Korea having only first visited Africa in 2015, the Forum is both necessary and will need to be more regular, and more ambitious in the goals it sets for itself. For its part, Africa seeks the following from South Korea: greater investment, aid in the short-run, and greater market access in the long run, whereas, according to a 2014 Chatham House report entitled South Korea’s Engagement in Sub-Saharan Africa: Fortune, Fuel and Frontier Markets, South Korea’s increasing presence in sub-Saharan Africa is motivated by three factors: “the pursuit of food and energy security; the establishment of new markets for its manufactured goods; and the enhancement of its credentials as a prominent global power, particularly in order to counter the diplomacy of North Korea” (Darracq and Neville 2014: 2). This goes back to the comparative advantage notion introduced in the beginning of the book. The country is in dire need of new avenues of trade and economic cooperation. Figure 8.3 demonstrates that South Korea’s imports from South Africa have grown from a higher base than Vietnam’s imports from South Africa of US$688.6-million in 2001 to US$ 2.35-billion in 2018. This is growth of 242.7%. But unlike the case with exports to Vietnam (and to China), these have grown at a less constant direction. This is the same pattern of growth and decline that was observed with regard to India in Chapter 5 which was determined as the reason behind China-bound exports outgrowing exports to India, and therefore of differentiated engagement. This presents areas for further research. So do other recent developments, including the Global Gateway, and the 2007-founded and recently (2017) revived Quadrilateral Security Dialogue (which includes India, Japan, and the US joined by Australia). The digitalization of trade merits further investigation as well, as the rivalries and commercial modes of both the Asian and African sides take on increasingly technologically driven means. Early indicators demonstrate that South Africa, and its broader region (Southern African Development Community, or SADC), are under-performing the WTO average (see Fig. 8.4). Over the 2015–2019 period, these countries on average had technological manufacturers compose 4.2% or less of their export portfolios. Only five countries performed higher, but still not reaching the 34.36% that is the world average. Yet, as noted in Chapter 1, Asian states have been increasingly more technological in their exports. This indicates a

Total annual imports (in billions of US$)

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3.5 3 2.5 2 1.5 1 0.5 0 2000

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Fig. 8.3 ROK imports from South Africa. 2001–2018 (in billions of US$) (Source TradeMap dataset [2019]8 )

future in which they will compete for technological access to Africa. In this iteration, the semiconductor industry, Taiwan’s main and indispensable contribution to global trade, may gain greater salience considering China’s dual status of being the leader in consuming Taiwan’s export of the product and its efforts in enhancing its own semiconductor industry to outcompete Taiwan (Deloitte China 2019: 9). On the other hand, competition over 5G provision may color the US–China competition in a way that has implications for South Africa as well. On the other hand, China, the EU, and the US will likely see some competition over setting of standards and bring some of this to the African continent. At play is the question of who will provide for Africa’s growing appetite as it seeks to action smart cities, respond to their domestic technological inequities, and leapfrog into digital futures. There is thus ample opportunity for research in the production of both technologies and standards around them as the world enters the so-called fourth industrial revolution. This should entail quantitative economic research, as well as, among others, use of discourse analysis and process

8 Available at: https://www.trademap.org/Bilateral_TS.aspx?nvpm=1%7c410%7c% 7c710%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c1%7c2%7c1%7c1%7c1%7c1 (Last accessed: 11 November 2019).

34.36

20.804

9.658 7.554

4.742 4.228 4.205 3.657 3.625 3.541 3.21 2.767 2.271 2.114 1.686 1.649 1.56

1.34

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Fig. 8.4 Average share of technology in exports, 2015–2019 (Chart by author, based on data sourced from the UN [2020] and the UJ 4IR and Digital Policy Research Unit [2021])

0

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tracing. Future studies can also seek to more universally replicate the comparative method with the central research question in this book. This will inform us on whether the findings made with regard to South Africa are generalizable or unique only to the county and the control group countries utilized in the various chapters. This will indicate whether there is a net effect in Africa and elsewhere, or whether we need to formulate a “typology.” In turn, our definition of Asia should look to other regions which meet the conditions laid out for the Asia–Pacific: competition and motivation to engage commercially and politically with Africa. The comparative method necessitates assessment with these other geostrategically competitive regions, primarily as the Middle East, whose countries are also part of the story of Asia’s upward trajectory, are seeking to (re)gain a foothold on the continent, and also have zero-sum outlooks vis-à-vis each other.

References Alence, Rod. 2007. SACU and the Political Economy of Regionalism: Towards Deeper and Broader Integration? SAIIA Trade Policy Briefing. Johannesburg: South African Institute of International Affairs. Darracq, Vincent and Daragh Neville. 2014. South Korea’s Engagement in Sub-Saharan Africa: Fortune, Fuel and Frontier Markets, October. Chatham House. https://www.chathamhouse.org/sites/default/files/field/ field_document/20141027SouthKoreaAfricaDarracqNeville.pdf. Deloitte. 2019. Semiconductors—The Next Wave: Opportunities and Winning Strategies for Semiconductor Companies. Beijing and Shanghai: Deloitte China. Ramani, Samuel. 2018. Can China Burnish Its Image in South Africa? The Diplomat, August 31. Available at: https://thediplomat.com/2018/08/canchina-burnish-its-image-in-south-africa/ (Last accessed: 2 November 2019).

Appendices

Appendix A: A Simple Game Theory Model of Asia–Pacific Competition and Its Implications for South Africa Chapter 2 gave a narrative account of why China’s rivals can neither go into outright conflict with China nor completely economically extricate themselves from it, and why this is relevant for South Africa. Below, I give a simple game-theoretic model in the form of the prisoner’s dilemma. The below matrix stipulates the following payoff scenarios for each of the actors:

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4

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China Cooperate

Compete

Cooperate

-2; -2

-4; 2

Compete

2; -4

-4; -4

Regional rivals

China and the countries with whom China is engaged in regional rivalries have the options of either cooperating—relenting claims to “one China” status in the case of Taiwan, letting up territorial claims in the case of Japan and India on the one hand, but this would reap major domestic backlash that might even threaten their regimes. They also have the option of defecting on the other by continuing their competition, declaration of independence on the part of Taiwan, and assertion of territorial claims in the case of Japan and India. However, it should be noted that this is a repeat game for these actors. Lessons have been accrued over a period of time and aversion to outright war has been built up by military losses to China and threats of annexation. China on the other hand has also been socialized into the prospect of US involvement on behalf of its allies. Thus the manner in which they may “compete” has evolved and its pursuit mediated by self-preservationist rationales. Thus, the manner in which these countries compete with China is not primarily through conventional means, but rather in the form of third-party markets. There is the additional fact of China being economically larger than them; thus gaining entry into a new market, at the expense of China, theoretically serves the additional purpose of marginally enriching them more than China, and China more than them from its own perspective. This is where

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the modulating effect of capabilities and resources takes effect; however, as none of these countries are capable of winning a trade competition against China. Appendix B: Historical Evolution of South African Rand per US Dollar, 1970/01/01 to 2018/12/31

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Interview(s) 22/11/2018: Ambassador Gert Grobler. Ambassador of South Africa to Japan. Personal interview. Auckland Park, South Africa. 26/11/2018: Ambassador Baso Sangqu. Former South African Ambassador to the United Nations, Former Head of Mission to the European Union. Personal interview. Parktown, South Africa. 14/01/2019: Mr. Aziz Pahad. Former Deputy Minister of Foreign Affairs (South Africa). Personal interview. Randburg, South Africa. 16/05/2019. Ambassador Welile Nhlapo, Former South African Ambassador to the United States. Seminar organised (‘South Africa and China at the UN Security Council’). Auckland Park, South Africa. 16/05/2019: Ambassador Lin Songtian, Ambassador Extraordinary and Plenipotentiary of the People’s Republic of China to the Republic of South Africa. Seminar organised (‘South Africa and China at the UN Security Council’). Auckland Park, South Africa. 18/06/2019: Ambassador Liu Yuxi, Head of Mission of the People’s Republic of China to the African Union. Personal interview. Addis Ababa, Ethiopia. 18 June 2019. 21/08/2019: Mr. Zhang Qin (Manager: China International Water and Electric Group). Personal interview. Kampala, Uganda. 21/08/2019: Mr. Temphis Zhong (Assistant Manager China Railway No Engineering Group Uganda Co. Ltd). 22/08/2019: Mr. Fang Yi (Director of Political Section: PRC Embassy in Uganda). Personal interview. Kampala, Uganda.

Index

A AAGC. See Asia-Africa Growth Corridor (AAGC) Abe, Shinzo, 54, 57, 62 African Development Bank (AfDB), 18, 53 African National Congress (ANC), 20, 73–75, 171, 179 Aging population, 60 Asia-Africa Growth Corridor (AAGC), 53, 117 and BRI, 47 origins of, 139 Association of Southeast Asian Nations (ASEAN), 24, 37, 42, 48, 70, 95, 177

B Belt and Road Initiative (BRI), 13, 43, 47, 49, 95, 133, 164 Border disputes, 59 Brexit, 32, 161, 166, 171, 173

BRICS, 24–28, 54, 117, 141 Britain, 87, 171

C Canada, 43 Cold War, 49, 62, 73, 140, 185 Colonization, 3 Commodities, 21, 99, 137

D Democracy, 14, 19, 73, 75, 115 Dynasty, 45, 51

E The Economist , 136 Egypt, 26 1996 election (in Taiwan), 70 Elections, 70, 71, 91, 142 European Union (EU), 20, 24, 32, 50, 94, 137, 155, 159–173, 187

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022 B. Ndzendze, The Political Economy of Sino–South African Trade and Regional Competition, International Political Economy Series, https://doi.org/10.1007/978-3-030-98076-4

211

212

INDEX

F Foreign direct investment (FDI), 6, 13, 67, 78, 89, 131, 135, 141, 159, 162–164, 171, 182 Forum on China-Africa Cooperation (FOCAC), 52, 89, 94, 97, 116, 143 4IR (Fourth industrial revolution), 11, 187 Fourth Industrial Revolution. See 4IR France, 44, 136, 163, 171

G G8, 181 Game theory, 191 Germany, 15, 18, 48, 172 Ghana, 92, 93, 185 Global Gateway, 24, 172, 186 Globalization, 9, 17

H Hegemony, 23, 46, 137, 179 Hong Kong, 4, 15, 30, 68, 69, 72, 74–88 Human rights, 22, 58, 172, 179 Hypothesis, hypotheses, 31, 68, 78, 83, 90, 96, 98, 106, 108–111, 113, 114, 119, 122, 126, 127, 132, 133, 142, 144, 151–153, 155, 156, 160, 164, 166, 169, 170

I India Brazil and South Africa (IBSA), 24, 116 Internet of Things (IoT), 11 Iran, 140 Italy, 37, 163

J Japan, 3, 4, 9–11, 15, 24, 30, 31, 35–37, 42, 45, 48–51, 53, 55–57, 59, 60, 62, 63, 69, 89–107, 109–111, 117, 171, 178, 183, 185, 186, 192 Jiang Zemin, 57 K Kazakhstan, 45–47, 59 Kenya, 31, 53, 90, 93, 97, 99, 100, 103, 106, 108–111, 132–134, 139, 141, 143–146, 149–156 Kyrgyzstan, 45, 46 L Laos, 47, 48, 53 Leadership, 19, 39, 41, 51, 116 M Made in China 2025, 11, 12 Mandela, Nelson, 19–21, 75, 140 Manufacturing, 5, 11, 22, 25, 29, 181, 182 Mbeki, Thabo, 1, 2, 20, 140 Media, 12, 28, 67, 94, 142 Mexico, 10, 43 Modi, Narendra, 36, 54, 55, 117 Multilateralism, 19, 136, 179 N Nanking Massacre, 45 National interest, 95, 96 Nigeria, 92, 93, 139 Nuclear, 4, 20, 21, 50, 51, 57, 60–62, 99 O O’Neill, Jim, 24

INDEX

P Pahad, Aziz, 76 Pakistan, 54, 59, 61–63 Portugal, 8, 43, 44 Putin, Vladimir, 20

Q Qing Dynasty, 51 Quadrilateral Security Dialogue, 186

R Ramaphosa, Cyril, 163 Russia, 20, 29, 45, 46, 50, 59, 117, 140–142, 171

S Scramble for Africa, 3, 31, 95, 132, 133, 135, 139, 156 Semiconductor industry, 187 Soft power, 115, 116, 171 South Africa, 2–4, 6, 13–16, 19–32, 37, 39, 50, 53, 63, 64, 67–69, 71–79, 81, 83–88, 90, 92, 97, 99–101, 103, 105, 106, 108–111, 114–118, 121–123, 125–127, 132–134, 138–146, 148, 149, 151–156, 159–173, 177–187, 189, 191 apartheid in, 73, 139 joining BRICS, 25, 27, 29, 53, 117 post-Apartheid economy, 3, 67 South Korea, 3, 24, 25, 36, 49, 50, 59, 177, 185, 186 Spain, 44 Stock markets, 24–28, 30

T Taiwan, 3, 4, 21, 24, 30, 35–37, 45, 49–52, 56, 60, 62, 63, 67–69,

213

71–73, 75, 77–81, 83–85, 87, 88, 94, 98, 143, 171, 178, 180, 185, 187, 192 Technology, 11, 22, 184, 188 Terminal High Altitude Area Defence (THAAD), 50 Thanat-Rusk communiqué, 49 Theory, 26, 32, 57 Trade, 2–7, 12–14, 16–23, 30, 32, 36, 37, 41, 42, 45–50, 53, 54, 57, 59, 67–69, 72, 73, 76–79, 84, 87, 89, 93–95, 98, 114, 115, 117, 118, 122, 123, 126, 127, 131, 132, 134–137, 139–141, 143, 155, 159, 161–163, 171–173, 185–187, 193 Trade war, 16, 57 Trump, Donald, 12, 16, 57, 91

U Uganda, 31, 90, 93, 99, 100, 103, 105–111, 156, 180 United Nations (UN), 6, 18, 54, 71, 73, 74, 100, 146, 165 United Nations General Assembly, 52, 74 United Nations Security Council, 52, 96, 179 United States (US), 3, 5, 9, 10, 15, 16, 18, 20, 24, 29, 31, 32, 35, 36, 41–43, 46, 48–52, 55–58, 60, 62, 70, 71, 79, 91, 92, 94, 97, 116, 123, 131–156, 162, 171, 178, 180, 185–187, 192

V Vietnam, 44, 47–50, 59, 177, 183, 184, 186

214

INDEX

W World Bank, 43, 100, 117, 146, 165, 180 World Economic Forum (WEF), 134, 135 World War II, 4, 51, 92

X Xi Jinping, 47, 52, 55, 117, 163 Z Zero-sum game, 31, 90, 111, 156, 160, 172 Zuma, Jacob, 2, 20, 28, 141, 179