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Vibrant Chinese coastal hubs have become biggest competitors for struggling Chinese companies in the provinces

Vibrant Chinese coastal hubs have become biggest competitors for struggling Chinese companies in the provinces

By Daniel Gros, Director of the Centre for European Policy Studies.

BRUSSELS – The temporary truce reached by US President Donald Trump and his Chinese counterpart Xi Jinping at the just-concluded G20 meeting in Buenos Aires should give both sides some time to reflect on the issues in question. And the most fundamental of those issues is whether American grievances against China – shared by many of the advanced economies – are justified.

To be sure, unilateral US measures are indefensible under global trading rules. But some pushback conceivably could be warranted if the advanced economies – which have already created an informal contact group of “China losers,” including representatives of the European Union, Japan, and the United States – are right that China has been engaging in unfair trading practices.

For the US, the biggest concern seems to be so-called forced technology transfer – that is, the requirement that foreign companies share their intellectual property with a domestic “partner” in order to gain access to the Chinese market. But this is a misnomer, at best, because companies that do not want to share their technology can always choose not to invest in China.

Europe’s complaints – or, more specifically, the complaints of over 1,600 European companies – are summarized in a new report issued by the European Union Chamber of Commerce in China. But, interestingly, few of those complaints are about China’s trading practices per se, at least in the narrow sense.

Tariffs, for example, are not cited. With its accession to the World Trade Organization in 2001, China was forced to reduce its tariff protections by one-half. In the ensuing years, the average tariff rate applied by China has continued to fall, and now stands at less than 4%, though China does maintain an unusually high number of tariff peaks (that is, high tariffs for very limited categories of product).

Of course, tariffs are far from the only way to create obstacles to trade. Indeed, in many ways, tariffs are yesterday’s problem – at least they were, until Trump dusted them off as a weapon for his trade war. But when it comes to non-tariff barriers, China’s record also does not seem as problematic as is claimed.

To be sure, it is difficult to measure the overall importance of non-tariff barriers to trade, because they can take so many forms. But, according to the independent Global Trade Alert observatory, since 2008, China has introduced only 25 measures (referred to as “state interventions”) per year, on average, that might restrict trade with the US.

Meanwhile, China enacted about the same number of new measures that liberalize trade with the US. Overall, then, China has not become more protectionist against the US; on the contrary, the opening process is continuing, albeit very slowly. By contrast, the US has enacted between 80 and 100 restrictive measures against China every year, and far fewer liberalizing measures.

Other indicators confirm China’s gradual move toward liberalization. This is the case even for foreign investment – an issue about which both US and European companies complain. Although China remains far less open to foreign direct investment than most advanced economies, the OECD’s composite indicator shows that there has been continuous, albeit sluggish, improvement.

In short, even if China’s non-tariff barriers (both formal and informal) remain high, they are lower than in the past. So, why are the US, Europe, and Japan pushing back now?

The answer lies in the increased competitiveness of Chinese producers. When Western companies had a near-monopoly on know-how and technology, their competitive edge more than compensated for distortions created by Chinese barriers to trade and investment. But, as Chinese enterprises have become increasingly serious competitors in their own right, Western countries’ capacity to bear the extra costs of non-tariff barriers has diminished.

Complaints about unfair Chinese trade practices, therefore, are actually complaints about the mismatch between the slow pace of economic opening and the very fast pace of modernization. The competitiveness gap between China and the OECD countries is closing much faster than the regulatory environment is converging.

In fact, per capita GDP – and thus productivity – in a number of Chinese provinces with a combined population of over 100 million is similar to that of advanced countries (around $30,000 per capita at purchasing power parity). Of course, the national average is much lower (about one-half), as overall productivity is much lower, and the Chinese authorities have to calibrate policies for their entire vast country. But, for the outside world, the high-productivity regions are what matters.

If we are to avoid further escalation of tensions, the West and China must acknowledge each other’s perspectives. Ultimately, however, foreign pressure will have little effect on China’s massive and powerful economy. The real question for China lies at home: Do enduring distortions and barriers to investment really serve the development of the country’s lagging provinces?

In the past, it might have made sense to protect the nascent industries in the coastal regions from foreign competition. Today, however, China’s protectionist regime does little to help nascent industries in the poor interior, because their biggest competitors are no longer foreign companies, but rather firms from the dynamic coastal areas. This implies that China must rethink its very development strategy. And to do that, the last thing policymakers need is an ongoing trade war.


Copyright: Project Syndicate, 2018.

www.project-syndicate.org


 

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Following reverse listing, public can now acquire shareholding in Paratus Namibia

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20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.