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Emerging powers in Africa Watch

Trade falling between China and Macau Forum countries

Lucy Corkin

2009-11-05, Issue 456

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With trade between China and the Portuguese-speaking Macau Forum countries falling in the wake of the global economic downturn, Lucy Corkin discusses Macau's efforts to 'leverage its position more aggressively to promote trade and investment between China and the Portuguese-speaking countries'.

Trade volumes between China and Portuguese-speaking countries have not been immune to the global crisis. Between January and August this year, trade between China and the other members of Forum Macau fell by 31.64 per cent compared to the previous year to US$36.49 billion. Given that they are both heavily commodities-oriented in their trade with China, Angola and Brazil, China’s two largest trading partners in the group, recorded the biggest falls, 50.3 per cent and 22.8 per cent respectively. Chinese imports from Portuguese-speaking countries reached US$25.60 billion, down 31.33 per cent, and exports US$10.88 billion, down 32.35 per cent. In the years before the crisis, 2006 had seen the tripling of China’s trade with Forum Macau to US$34 billion, with trade increases of 46.9 per cent and 66 per cent in 2007 and 2008 respectively. In 2008, total trade reached US$77 billion, surpassing the trade target of US$50 billion by 2009 a year early. Despite the drop this year in an otherwise impressive trade increase, from June figures have already shown signs of recovery, marking an increase of 17 per cent on the previous month. Some of the smaller economies, such as East Timor (119.6 per cent), Guinea-Bissau (43.4 per cent) and Cape Verde (29.8 per cent) recorded impressive trade increases in the first half of this year, mostly due to a growth in imports from China.

Macau will seek to leverage its position more aggressively to promote trade and investment between China and the Portuguese-speaking countries, and nowhere is this more evident than in the 14th Macao International Fair (MIF), held in October. This year recorded the highest ever participation by Portuguese-speaking countries, seven of which were represented at the fair: Angola, Brazil, Cape Verde, Guinea-Bissau, Mozambique and East Timor. Ambassadors from each country were in attendance, accompanied collectively by over 100 officials from the seven countries. According to the head of the Institute for Promotion of Trade and Investments of Macau (IPIM), Lee Peng Hong, Macau is seeking to leverage itself as a services hub for Portuguese-speaking business interests. While only approximately 2 per cent of the local ‘Macanese’ speak Portuguese at all, Macau has worked hard to use the weight of its cultural connections to reach out to particularly those Portuguese-speaking countries in the developing world. Setting its sights further than a regional scope, this year’s MIF saw a 20 per cent increase in participation, largely from the EU and ASEAN (Association of Southeast Asian Nations), with 288 delegations from all over the world.

Under the banner of 'Diversity – key to extending a decade of prosperity', Macau is seeking to promote and consolidate its role as a trade, investment and services platform, particularly given that this year marks the 10-year anniversary of Macau’s return to China. Boasting an annual average growth rate of 10 per cent over the last decade, Macau is also looking to coordinate ‘integration’ with the special administrative region Hong Kong and special economic zones in Guangdong to promoting small and medium enterprise (SME) development in these areas.

According to the vice-president of the China Council for the Promotion of International Trade, Zhang Wei:

'Macau has an "irreplaceable role" in serving as a channel for Chinese SMEs, particularly those hailing from the Pearl River Delta, to enter the Portuguese-speaking markets. This newfound official enthusiasm for SME development seems to be derived from the realisation that, particularly in the wake of the economic crisis, they are the "most active factor in development of the economy and the biggest drivers of economic growth and social development". This would appear to be true. China is home to more than 42 million SMEs, which absorb 75 per cent of the urban workforce and reportedly generate 60 per cent of China's GDP [gross domestic product] in goods and services.'

Macau Secretary for Economy and Finance Francis Tam Pak Yuen is quoted as saying that Macau’s future economic development was to 'promote sustainable growth of the gaming industry, expand and upgrade related service sectors, facilitate diversification, and reinforce regional cooperation in order to make Macau become a global leisure and tourism hub and a regional trade and investment services platform'.

It appears these efforts run parallel to Macau's limiting the further expansion of the gaming industry. Macau’s government met with the city’s six casino operators in October, reportedly to ‘review the size and growth of the industry’. This is despite restrictions on Chinese nationals visiting Macau having recently been relaxed. The industry has experienced a massive turnaround since August after having suffered during the economic crisis. It currently outstrips takings in Las Vegas by almost three to one.

Brazil continues to be China’s largest trading partner among the Macau Forum member countries, and China overtook the United States to become Brazil’s largest trading partner in 2008. A clear indication of the importance of this strategic relationship came when the China Development Bank in May this year announced a US$10 billion to Brazilian national oil company Petrobras. As with a similar loan arrangement through Exim Bank in Angola, oil is the collateral on this deal. Brazil will supply China with 200,000 barrels per day, almost 7 per cent of China’s current oil needs. There are also signs that Brazil and China are cooperating in areas of technology including deal-water oil exploration, commercial aviation and satellite technology. Brazil hosted the Forum on Economic Cooperation with Portuguese-speaking Countries in Rio de Janeiro in August and the Portuguese Language Business Meeting (VEENLP) in Fortaleza in September. It appears that amid concerns to the contrary, the president of the Brazilian Investments Promotion Agency (Apex) was forced to declare at the former event that ‘Brazil and China were not competitors in Africa’. Brazil is eager to promote the export of its agro-industries equipment and technologies to Africa. China seems keen to invest in the same sector. The China Development Bank, China’s largest policy bank, has recently been active in securing investments in agriculture, having in March this year announced a deal of US$1 billion with Angola for agricultural development.


* Lucy Corkin is a PhD candidate at the School of Oriental and African Studies (SOAS) and resident Macau Forum analyst for Fahamu’s Emerging Powers in Africa Watch programme.
* Please send comments to [email protected] or comment online at Pambazuka News.

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