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Mineral-rich developing countries urged to have ‘more beneficial engagements’ with China

4th May 2018

By: Nadine James

Features Deputy Editor

     

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South Africa and other mineral-rich developing countries with close economic links to China must reassess their trade policies to provide a buffer against fluctuating commodity demand, according to Witwatersrand University School of Mining Engineering postgraduate student Peaceful Mathebula and lecturer Tomi Oshokoya.

Mathebula and Oshokoya highlighted the need for South Africa and other developing economies to be better prepared to enter “more beneficial engagements” with China, having become vulnerable to changes in China’s economic growth trajectories.

“The ‘less’ stringent trade terms and conditions, as well as infrastructural development offered by China, have been hailed as the answer to the key economic challenges of many mineral-rich developing countries,” Mathebula and Oshokoya said.

However, with lower mineral and metal product exports to China, countries like South Africa have seen a decline in key economic indicators like gross domestic product (GDP) growth and employment rates.

“As mineral commodities trade relations between developing states and China continue to grow, it is imperative to use this relationship more advantageously – as a platform for the exchange of information and strategies to increase opportunities for all partners,” they said.

It is clear that, over the past two decades, many mineral-rich developing countries has become increasingly dependent on China – which previously averaged a growth rate of about 10%. In the interim, China has become and remains South Africa’s largest trading partner.

Mathebula and Oshokoya pointed out that many mineral-rich developing countries lack the physical infrastructure and institutional frameworks necessary to fully leverage the benefits of growth spillovers resulting from trade with China. They argue that there are lessons to be learned from China itself in this regard.

For example, part of China’s recent economic success is built on its culture of savings and investment in long-term efforts, like promoting the manufacturing sector, increasing labour productivity and prioritising technological innovation – especially during buoyant economic times.

“Another key economic driver is China’s impressive strategy on research and development (R&D) expenditure, which is estimated to account for 15% of the world’s total spending on R&D,” they said. While China currently spends about 2% of its GDP on R&D, the comparable figure for South Africa is about 0,7%.

They recommended that developing countries should use these trade relations with China to expand their knowledge on how to develop other sectors of their economies – including agriculture, industry and science and technology. Beyond trade policy, Mathebula and Oshokoya noted that it was important to also use industrial and minerals policies to steer away from being excessively dependent on minerals and other products with fluctuating global prices.

“New policy directions can provide buffers that will help the economies of mineral-rich developing countries to handle unexpected global economic changes, as well as the aggressive nature of China’s approach to her trading partners, in preparation for an another cycle of China’s economic advancement,” they concluded.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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