China lent $110 bln to developing countries in 2009-10, much more than the WB during the same period
A cross section of Sri Lankan businessmen gathered in Colombo recently to discover the intricacies of doing business with China based on a thorough study titled ‘Doing Business with China, FTA and Beyond’.
One of the main revelations in how to do business with the China was that trade is not necessarily the most important factor that drives free trade agreements (FTAs) with China. In the main research presentation made by Subhashini Abeysinghe, Head of Economic Research, Verite Research,she said the key behind Chinese FTAs is politics and economics and not trade.
The Forum on “Doing Business with China” in Colombo last week was organized jointly by Verite Research and the Exporters’ Association of Sri Lanka of the Ceylon Chamber of Commerce.
The panel discussion that followed the presentation saw the participation of Dr. Nishan De Mel – Executive Director, Verité Research; Deshal De Mel – Senior Economist, Hayleys Ltd; Anushka Wijesinha – Research Economist, Institute of Policy Studies; Yohan Lawrence, Chairman, Apparel Exporters’ Association; Niraj de Mel, former Chairman of the Tea Exporters’ Association and P.D. Fernando, Former Director General, Department of Commerce.
Ms. Abeysinghe said that China has so far entered into 14 FTAs with different countries and eight more are pending. Last month China signed FTAs with South Korea and Australia.
Once China enters into strategic partnerships with countries, interaction is at a very high level between the government and the private sector and followed by many more high level forums, and many visits of delegations by each other, she said.
Sri Lanka, she said, has entered the Chinese market at a rather late stage but it’s a rapidly growing market.
She said that China is a late comer in the arena of FTAs because the global powerhouse joined the World Trade Organisation only in 2001.
Elaborating on the reality that China is more concerned in the political and economic sphere, Ms Abeysinghe said that in its first-ever FTA – with Iceland – the first sentence introducing the FTA noted that this is the first developed European nation to recognize China as a fully developed market economy.
She said that most of the Chinese funding is done by the Chinese Development Bank and by the Bank of China, but unfortunately unlike OECD countries these two Chinese financial institutions do not publish data on their lending and thus the figures of Chinese funding would not be hundred per cent accurate; they are all estimates.
Their (Verite’s) research, she said has found out that in 2009 and 2010 China lent US$110 billion to developing countries, much more that what the World Bank has provided during the same period.
She pointed out that this provides a rough idea of how important China is in the financial markets with loans which are essentially on commercial terms.
She said that the Chinese financial growth is more likely to be multilateral and has become a major source to countries like Brazil, Russia, India, Thailand and South Africa.
China is the largest exporter in the world with $2 trillion worth of exports in addition to being the second largest importer in the world with a large trade surplus. It has the largest foreign reserves in the world worth $4 trillion and is one of the reasons which this super power is lending heavily to developing countries.
She said that while China is supporting Sri Lanka the latter’s exports (to China) is a meagre 1.3 per cent of that country’s total imports while exports from there to Sri Lanka accounts for 15 per cent of the import total here. Most of the trade is in government to government contracts including lending facilities.
While Chinese tourist arrivals in Sri Lanka in 2013 was 54,288, to Thailand it was 80 million and to Vietnam was 1.9 million, she pointed out. Though Sri Lanka was also late to enter this sector, luckily, the country seems to be attracting more travellers from there. According to tourism authorities, Chinese visitors here are expected to reach more than 125,000 in 2014.