Zeroing in on China – Africa trade tariffs

Posted on Monday, August 30, 2010 by Tiffany Ma

China’s burgeoning trade relationship with Africa was boosted by last month’s announcement that a zero-tariff scheme has been expanded tenfold to include 4762 products and commodities from 26 least developed African countries. This preferential treatment applies to approximately 60% of current imports and there are plans to broaden it to 90% of imports from all of China’s diplomatic allies in Africa over the next three years.

China’s diversifying engagement with Africa was laid out in the 2006 White Paper and solidified through its pledges at the 2009 FOCAC. In the spirit of South-South cooperation, the zero-tariff scheme provides non-monetary aid these least developed countries with a 'view of expanding and balancing bilateral trade.’ The official announcement was also accompanied by a pointed reaffirmation of Beijing’s support for the Millennium Development Goals and call for the restart of the Doha round talks.

In addition to providing development assistance and deepening economic links, the preferential access scheme is also an attempt to roll back the resource-driven trade imbalance. Despite an 80% boom in zero-tariff imports to US$2.13 billion in 2009, the significant trade deficits registered by the 21 non-oil producing countries indicate that the new concessions are unlikely to immediately tip the bilateral trade balance, which remains skewed toward import of resources and primary products.

The zero-tariff scheme also faces foreseeable demand and supply side limitations. African exporters face production challenges due to a lack of infrastructure, capital investment, and in some instances, political stability. Demand side restrictions from China include non-monetary barriers such as technical and safety standards. However, this may lend momentum to establishing bilateral mechanisms for regulating product quality. This can address concerns quality issues that have beset some Chinese exports to Africa as well as navigate potential restrictions for African imports.

Over the longer term, supply side initiatives such as loans to small and medium enterprises administered through the Sino-Africa Fund can help stimulate production and exports. The establishment of Special Economic Zones (SEZs) in Zambia and Ethiopia can also help boost industrial competitiveness. However, the increasing influx of cheap Chinese goods has undercut manufacturing sectors in parts of Africa; thereby limiting their export capacity, especially for more profitable value-added goods. On the demand side, the growing African diaspora in China can become a critical economic link to facilitate imports. However, the net benefit for Africa may be offset by Chinese companies in Africa taking advantage of the trade opportunity to profit from exports, particularly through the SEZs.

For China, the zero-tariff scheme consolidates its status as a vital trading partner for Africa by capturing a greater segment of Africa’s exports. At the same time, the unilateral trade preference also reaps decisive diplomatic advantages by enhancing China’s overall image and standing in Africa.

Image: Chinese Premier Wen Jiabao speaking at the Fourth Ministerial Conference of the China-Africa Cooperation Forum in 2009

Under the Radar News 8.27.10

Posted on Friday, August 27, 2010 by Alexandra Matthews

A weekly compilation of underreported developments in Asia

  • The United States approved sale of radar equipment to Taiwan to upgrade the island's air defense radar systems. The sale will be carried out through a direct commercial sales program, a move welcomed as a sign toward normalizing arms sales.

  • Japan is turning its attention to developing economies and plans to send 100 diplomats to countries including India, South Africa, Brazil, and Turkey. Part of this transition will involve bringing infrastructure-related technologies to the emerging economies and securing support for global issues such as climate change and nuclear disarmament.

  • A senior Vietnamese defense official said China’s military build-up does not threaten regional stability. The official described China as a “friendly neighbor” and noted that because of its strong military, China can contribute to disaster relief in the region.

  • Australia, Japan, Korea and New Zealand will sign the Anti-Counterfeiting Trade Agreement, which aims to restrict internet piracy around the world.

  • In a year that saw thousands of natural disaster-related deaths, China has spent $357 million on flood and drought prevention and relief. China plans to reinforce vulnerable dams and reservoirs and establish a nationwide flood monitoring and early warning system.

  • Eight high-ranking Burmese military officers, including junta chief Snr-Gen Than Shwe have stepped down from their military posts just months before the country’s first election in twenty years. Than Shwe and the other officers will retain their government posts and will likely continue to exert their influence from behind the scenes.

  • The Indonesian and Malaysian foreign ministers will meet next month to discuss the sea boundary between their countries. The meeting is being held after the Indonesian Fisheries Ministry detained seven Malaysian fishermen and Malaysian forces detained three officers of the Indonesian ministry in Indonesian-Malaysian waters, an incident the officials say they hope to learn from.

  • New Zealand has joined the Asia-Europe Meeting as one of the three non-European and Asian nations participating in the forum.

  • The UN has reported that over 1 million people in Kyrgyzstan do not have enough food, a figure that will likely rise as a result of high food prices, approaching winter months, poor harvests, and last June’s violence in the south.

  • In response to the Pentagon report detailing China’s plans to move advanced CSS-5 ballistic missiles to the Sino-Indian border, India will deploy its Agni-II ballistic missile to its border with China. The missiles have a range of about 2,000 km.

  • Chinese experts have warned that water and land shortages could significantly reduce the country’s grain output over the next ten years. A growing population and decreasing reserves of arable land will make meeting the government’s goal of boosting grain output to more than 550 million tons by 2020 difficult.
  • Under the Radar News 8.20.10

    Posted on Friday, August 20, 2010 by Alexandra Matthews

    A weekly compilation of underreported developments in Asia

  • A consortium of Chinese and Australian companies will develop three Iranian oil fields, which are expected to eventually produce 20,000 barrels of oil per day. China has been a strong economic supporter of Iran, which has the world’s third largest oil reserves.

  • The Presidents of Afghanistan, Pakistan, and Tajikistan met at a summit in Russia this week to discuss coordinating anti-terrorism and drug trafficking measures, among other issues. At NATO‘s request Russia has agreed to provide training and equipment to Afghan forces, but will not send troops into the country.

  • Thai naval vessels carrying 371 personnel will head to Somalia in September to assist the international anti-piracy effort. Thai vessels have been victims of pirate attacks in the past and a government official noted that piracy disrupts the economies of many countries.

  • Despite strengthening political and economic relationships, China has moved new longer range CSS-5 missiles to its borders with India. China is currently undertaking large-scale infrastructure development in Western China, near its disputed territories with India.

  • Government ministers from Cambodia, China, Laos, Myanmar, Thailand and Vietnam have agreed to build a railway in the Mekong area, which will connect over 300 million people in the region. The participating countries hope that the project will boost trade and economic development.

  • North Korea has begun building up a personality cult around Kim Jong-il’s son and likely heir, Kim Jong-Un. According to South Korean intelligence sources, Jong-Un has recently been more active in policymaking and inspection tours.

  • Taiwan has passed a controversial bill that will allow mainland Chinese students to enroll in Taiwanese universities. Although Chinese students will not be permitted to hold jobs while studying in Taiwan, the country’s lawmakers hope the bill will provide students with valuable educational exchanges.

  • Pakistani militant groups such as Jamat-ud-Dawa and Sipah-e-Sahaba are using social networking sites such as Facebook. Although the Pakistani government recently censored websites in the country for ‘anti-Islamic’ content, the groups have been operating freely on the internet.

  • Around 50 pro-independence groups staged a two-day sit-in in Taipei to protest the economic cooperation framework agreement (ECFA), signed by Taiwan and China in June. Some opponents of the pact fear political motives are always at the root of China’s economic deals.
  • ECFA and Beyond

    Posted on Friday, August 13, 2010 by Tiffany Chen

    The political whirlwind surrounding the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China left many questions still spinning in the air. Many pundits continue to debate Taiwan’s ultimate gains from this preferential trade agreement particularly whether it opens doors to other trade opportunities.

    Many are hopeful that ECFA will transform Taiwan into an economic hub in the Asia-Pacific. By regulating and liberalizing trade and investment with China, ECFA could increase Taiwan’s export and import volume and enhance economic growth. After ECFA, Taiwanese businesses can enjoy greater competitive advantages in the mainland market, especially compared to their Korean and Japanese counterparts. Taiwan could also attract foreign firms seeking greater economic access in China through joint ventures with local companies. If this practice proliferates, it will enhance Taiwan’s status in the global trade.

    Already, there are positive indicators after the signing of ECFA, including improved ratings of Taiwan’s investment climate and raised GDP forecast. Most significantly, the post-ECFA climate has generated momentum toward expanding Taiwan’s trade arrangements. Singapore and Taiwan has made groundbreaking overtures for an economic agreement and ASEAN member states such as Malaysia, the Philippines, and Thailand have also been studying the feasibility of trade agreements. Foreign groups such as the American, European and Japanese Chamber of Commerce in Taipei have voiced their support for FTAs between Taiwan and the countries they represent. Despite the stalled U.S.-Taiwan Trade Investment Framework Agreement process, Washington has endorsed ECFA and encouraged the island to expand foreign trade relations. Furthermore, major foreign trading partners such as the European Union and Russia have also expressed their desire for promoting closer economic, educational and cultural exchanges with Taiwan.

    Despite these favorable developments, the politicized cross-Strait environment complicates Taiwan’s formal international activities. On the basis of the “One China” principle, Beijing has opposed Taiwan seeking free trade agreements (traditionally signed between two sovereign entities), with China’s diplomatic allies. Yet, the mainland Taiwan Affairs Office’s recent statement that Taiwan's FTA matters will be “reasonably, practically, and adequately” addressed may signal a more moderate approach going forward.

    If warming cross-Strait relations foster a more hospitable environment for Taiwan’s international activities, China may still seek to limit Taiwan’s exploration of economic ties to Beijing’s free trade partners (currently, these include Singapore, Hong Kong, Macao, Chile, Pakistan, New Zealand, Peru, and Costa Rica as well as ASEAN). Yet, if Beijing seeks to aggressively impose such limitations, then it will likely sour the atmospherics of cross-Strait ties. Hence, such a move may be adverse to Beijing’s long term interests, particularly with upcoming Presidential elections in 2012 when China’s reaction to Taiwan’s trade aspirations could become an electoral issue that further complicates cross-Strait relations.

    Image Source: China Review News

    Under the Radar News 8.13.10

    Posted on by Steve Gummo

    A weekly compilation of underreported developments in Asia

  • Indian police forces have arrested two members of the Pakistani Inter-Services Intelligence (ISI) after unearthing an elaborate terror plot in the Bangalore region. The plot attempted to destabilize the government by engaging and supporting native Maoist rebels.

  • The Japanese government is refusing a US$435 million loan to Guam for a sewage renovation project necessary for the U.S. Marine Corps' Futenma relocation. Following difficult negotiations and other complications, the move may not be completed until 2020.

  • The PRC plans to invest over US$15 billion (100 billion Yuan) over a ten-year period to develop “green” automotive technology. China is expected to produce 15 million green automobiles annually by 2020, with a focus on the production of electric vehicles.

  • Taiwan, possessing Asia’s fourth-largest stock market, is in discussion with Japanese authorities to list exchange-traded funds in Japan. This move is part of Taiwan's aspiration to become an international fund-raising center.

  • Japan’s national debt has reached over 900 trillion yen, or US$10.6 trillion; 1.9 times the GDP of the island nation for the 2009 fiscal year. Government officials project that the Japanese debt will cap at 973 trillion yen in March 2011.

  • General Liu Yazhou, a two star general in the People’s Liberation army, released a pointed commentary in Hong Kong’s Phoenix magazine stating that the PRC must either adopt U.S.-style democracy or face a collapse similar to that of the former Soviet Union.

  • Due to budgetary constraints, Tokyo considers cutting the Japan Exchange and Teaching program - an initiative viewed by others as a key element of its public diplomacy program, particularly in promoting U.S.-Japan relations.

  • Chinese authorities have arrested a Uyghur farmer who attempted to file a complaint against the seizure of his property by local governmental officials.

  • Thailand’s High Court rejected an appeal request on behalf of ousted Prime Minister Thaksin Shinawatra concerning the 2006 government seizure of his personal assets.
  • New on AsiaEye: Insight series

    Posted on Thursday, August 12, 2010 by Tiffany Ma

    AsiaEye, the official blog of the Project 2049 Institute, will now occasionally feature longer “Insight” pieces that examine strategic trends and developments in the Asia-Pacific in greater depth.

    Insight #1: Asia's Turbulent Waters: Blue Water Tensions in the Yellow Sea

    Naval tensions mounting over recent months in Asia have unfolded in a blue water drama featuring almost every seafaring nation in the region. After North Korea allegedly sunk a South Korean ship, China and North Korea vehemently protested a set of joint naval exercises scheduled by the United States and South Korea while Washington and Beijing traded barbs on the best means for claimants to settle territorial disputes in the South China Sea. These simmering tensions will test how territorial disputes, relationships between great and rising powers, key alliances, and freedom of navigation will be managed over the next few decades.
    Insight #2: Second Artillery Anti-Ship Ballistic Missile Brigade Facilities Under Construction in Guangdong?

    Recently, China’s state-run media quietly announced the construction of facilities for a new Second Artillery missile brigade – the 96166 Unit – in the northern Guangdong municipality of Shaoguan [韶关]. Although the province is already home to a Second Artillery short-range ballistic missile (SRBM) brigade (the 96169 unit in Meizhou), initial reports and indicators signal that the new unit could have unique capabilities that could complicate the strategic calculus in Asia, and the South China Sea in particular.

    Recent articles and analysis on China's anti-ship ballistic missile development:

    Under the Radar News 8.6.10

    Posted on Friday, August 6, 2010 by Alexandra Matthews

    A weekly compilation of underreported developments in Asia

  • Malaysia will receive $591 million worth of rail vehicles from China South Locomotive and Rolling Stock Corp, by 2012. The new vehicles are expected to reduce operating costs by 15 percent annually.

  • Indian Defense Minister, A.K. Anthony, reported that the country's three defense services are short 14,244 officers.

  • Japan plans to launch a study into the possibility of importing uranium from Kazakhstan. Uranium from Kazakhstan currently goes through several countries during the enrichment process before reaching Japan, the world’s third largest nuclear energy producer.

  • The Thai intelligence service reports that more violence is expected in the country’s capital. The news comes as a former soldier is arrested under suspicion of involvement in recent Bangkok bombings.

  • The Abdullah Azzam Brigades, a group loosely connected to Al Qaeda, has claimed responsibility for last week’s attack on a Japanese tanker in the Strait of Hormuz.

  • The United States and Vietnam are discussing sharing nuclear fuel and civilian nuclear technology. The move is seen by some as an attempt to counter China’s influence in the South China Sea.

  • The activity of South Korean fighter jets has been restricted as North Korea moves anti-aircraft missiles near the DMZ. The SA-5 missiles have a range of 250 kilometers.

  • During a meeting in Beijing, Chinese Vice Premier Li Keqiang and Iranian Oil Minister Masoud Mirkazemi agreed to work together on unspecified cooperation projects of mutual interest. Li praised the two countries’ economic relationship as well as growing “people-to-people” ties.

  • Officials from ASEAN, China, Japan, and Korea met in Beijing to discuss environmental issues. The ASEAN representatives detailed educational initiatives, such as the ASEAN youth forum on sustainable development and eco-school programs, the organization has established.
  • Second Artillery Anti-Ship Ballistic Missile Brigade Facilities Under Construction in Guangdong?

    Posted on Tuesday, August 3, 2010 by Mark Stokes

    By Mark Stokes and Tiffany Ma

    As the PRC’s Ministry of National Defense seems to be warming to the notion of discussing a possible withdrawal of missiles opposite Taiwan, the People’s Liberation Army’s (PLA) primary strategic strike force, the Second Artillery, is continuing to beef up its arsenal despite the cross-Strait political détente following the Economic Cooperation Framework Agreement (ECFA).

    Shaoguan city leaders visit the 96166 Unit
    Last week, China’s state-run media quietly announced the construction of facilities for a new Second Artillery missile brigade – the 96166 Unit – in the northern Guangdong municipality of Shaoguan [韶关]. Although the province is already home to a Second Artillery short-range ballistic missile (SRBM) brigade (the 96169 unit in Meizhou), initial reports and indicators signal that the new unit could have unique capabilities that could complicate the strategic calculus in Asia, and the South China Sea in particular.

    Although the introduction of the 1,700km range solid fuelled, terminally guided DF-21C ballistic missile into Guangdong is possible, the brigade is also a candidate to be the first unit equipped with the DF-21D anti-ship ballistic missile (ASBM). The DF-21C, first introduced into the active inventory in 2005, is designed to attack fixed targets on land. If an ASBM is successful in passing the necessary design reviews and a sufficient sensor network is in place, the Shaoguan brigade could become the first in the PLA to field a lethal capability against moving targets at sea out to a range of 1,500-2,000km or more from launch sites.

    There are indications that the research and development (R&D) stage of the DF-21D is near completion and it is close to low rate initial production. A new DF-21D solid rocket motor production facility in Inner Mongolia was completed in 2009 and Admiral Robert Willard, Commander of the U.S. Pacific Command, testified before the House and Senate Armed Services Committees in March 2010 that the ASBM is in its testing phase. The Second Artillery planned to finalize the design of the DF-21D by the end of 2010 and the establishment of a permanent deployment location often coincides with the design finalization of a new missile. However, an initial operational capability is likely a ways off, as a follow-on testing of a prototype design may be needed prior to certification for full-rate production.

    When fully equipped, a new Second Artillery brigade in Shaoguan would likely take advantage of the city’s location along major transportation arteries and tunneling through the Nanling [南岭] Mountains that divide Guangdong and Hunan provinces. A Second Artillery engineering unit known to be responsible for tunneling work under the so-called “Great Wall Project” has been in Shaoguan since as early as 2008.

    Although the missile and infrastructure is yet to be fully operational, the Second Artillery has likely assigned a core cadre of officers to prepare for introduction of the new missile. Over the last four years, a select group of officers assigned to the 96166 Unit have been attached to an established DF-21 brigade in Chizhou, southern Anhui province (the 96161 Unit, or 807 Brigade). Presumably, the core cadre has been leveraging the expertise of their hosts to develop tactics, training simulation systems, and maintenance procedures for a new DF-21 variant. During this time, they also likely worked alongside the design team from the China Aerospace Science and Industry Corporation (CASIC), the prime contractor for missile R&D and manufacturing.

    Whether the unit is equipped with the DF-21C or the more advanced DF-21D maritime variant, the establishment of a conventionally-capable medium range ballistic missile brigade in Guangdong would decisively expand the Second Artillery’s striking radius. More specifically, it would enable the Second Artillery to support the Central Military Commission to enforce territorial claims in the South China Sea, or strike targets in a Taiwan-related contingency without having to overfly Japanese territory.

    Like other Second Artillery brigades, the 96166 unit would likely play a role in a military contingency in the Taiwan Strait. To this end, its leadership was strategically selected from experienced personnel from other brigades with a similar mission. The 96166 Unit’s commander Col Tang Qixing [唐其兴] and deputy commander Tang Guozhong [汤国忠] both served in the 96167 Unit, a SRBM brigade based in Yong’an city in Fujian province. The Yong’an brigade is also one of at least five SRBM brigades arrayed against Taiwan.

    Confirmed and possible Second Artillery units
    The 96166 Unit’s move to Shaoguan is not the only recent development that signals a possible broadening of the Second Artillery’s capabilities in alignment with China’s widening ‘core interests’ in the region. The settling of the 96166 Unit in Shaoguan also coincides with the permanent deployment of another possible DF-21-related unit in Guangdong. Similar to the 96166 Unit’s relationship with the DF-21 brigade in Chizhou, a core cadre under the 96219 Unit has been attached to a host DF-21 brigade in Chuxiong, Yunnan Province. Media reports as early as 2007 highlighted the achievements of personnel from the 96219 Unit in developing doctrine and simulation systems for a new missile system. The latest reports indicate that the unit has moved to Guangdong’s Qingyuan municipality, approximately 125 kilometers south of Shaoguan. In addition to the Qingyuan unit, another Second Artillery facility - perhaps a forward deployment base for ground launched cruise missiles - is under construction in the eastern suburbs of Sanya City on Hainan Island.

    Although these units will not be fully operational in the short term, the missile buildup in southeastern China is nonetheless profoundly strategic as the PRC seeks to secure its regional interests in the Taiwan Strait and beyond. More specifically, the location of the 96166 Unit may signal an extension of China’s ballistic missile diplomacy into the South China Sea. In light of the recent political ruckus over territorial claims and the public declaration of U.S. interest in the waterway, there are heightened stakes for key players to increasingly assert their national interest in these contested waters.

    Image sources: and Google Maps

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