Friday, 22 April 2016

Fiji and China Economic Pathways

Fiji has had a constructive working relationship with China since the establishment of diplomatic relations in 1975. To use the Asian expression, the relationship has been like ‘lips and teeth’ with China providing ongoing support and assistance to Fiji despite its challenging relationship with regional neighbours Australian and New Zealand during the 2007-2013 period. This article looks at Fiji’s economy, its relationship with China and the potential for increased economic activity.

President Xi Jinping had stated that the Peoples Republic of China treats all countries in the world community with respect regardless of their size and wealth. In the case of Fiji, PM Bainimarama had noted that China was a true friend who recognised Fiji’s sovereignty when dealing with internal issues and challenges. (The current PACER Plus framework for trade and economic co-operation is a case in point where concerns have been raised about an unbalanced agreement that provides New Zealand and Australia unprecedented access to the Fiji market without reciprocal arrangements. )

Premier Li Keqiang stated that the Chinese Government would continue to encourage Chinese investment in Fiji to grow the economy and improve the lives of Fijians.
China’s Economy
Although the world economy has recovered slowly, China’s economy has continued to do well. While the United States and EU states are concerned about going back into recession, the Chinese economy is envisaged to move up in 2016 at a slow but nevertheless healthy rate of 7.4%. In 2016, China’s GDP is about 50% of the United States. In 2000 it was about 10%. Gross domestic product (GDP) is the money value of all the finished goods and services produced within a country's borders in a specific time period. If the annual economic growth gap between China and the US is 6% per year and real appreciation is 2.5% annually, then China’s economy would become bigger than the US before 2020.
China’s economic growth has improved living standards dramatically and facilitated the huge increases in its middle class. This is one of the most vital and influential economic groups that countries with well developed tourism industries, like Fiji, should tap on. The Economist magazine reports that nearly 1 in 10 international tourists globally is now Chinese, with 97.3m outward-bound journeys from China, of which around half were for leisure. Chinese tourists spend most in total ($129 billion in 2013, followed by Americans at $86 billion) More than 80% of Chinese tourists say that shopping is vital to their plans. They are expected to buy more luxury goods while abroad than tourists from all other countries combined.
A powerful Chinese economy means that there is a symbiotic relationship with developing states like Fiji based on equal partnership and recognition of national sovereignty. This will also have a positive effect on the global economy. An economically stable China is therefore good news for developing countries like Fiji because it means that there are no strings attached to prosperity. Fiji would not need to adopt neo colonial policies that is mandatory when dealing with its long time regional neighbours.

Fiji’s Economy
Fiji’s economy is expected to grow by 4.5% in 2016 due to State reforms & stimulus, huge investments and higher consumer spending facilitated by low oil prices. In mid 2015, the global financial services company called Standard & Poor’s raised its long-term sovereign credit rating for Fiji from B to B+. This was done due to the stable economic outlook after the September 2014 elections and re-engagement with development partners.  Tourists arrivals have grown annually increasing by 8.7% in the first 2 quarters of 2015. Fiji Airways has leased and purchased new aircrafts and opened up new routes which should further boost tourist arrivals. The Reserve Bank of Fiji stated that in Quarters 1 and 2 of 2015 new lending for investment (mainly in construction) increased by 82.1%. New lending for consumer purchases increased by 14.4%. The reduction in oil prices kept average inflation at a low 1.3% in the Jan – July 2015 period. I predict that Fiji’s economic growth rate will be 5.2% in 2016

Fiji and China Economic Relationship
From 2000 to 2014 Fiji’s imports from China of machinery, vehicles, food products, clothing, footwear, iron & steel, chemicals, and furniture had reached about $624 million. Fiji’s exports to China of wood chips, fish, tuna, seaweed, mineral water, vegetable products and Bauxite had risen in the 2000 – 2014 period to about $135 million. One of the challenges of supplying the Chinese market is that Fijian exporters / manufacturers would not be able to keep up with the huge supply demands.
There is scope however to expand the supply of marine products, ginger products and cosmetics. Adopting a strategy of developing niche market products would auger well for our exports to China. Other areas that could be jointly developed is in pharmaceutical products and smart tech.
There is potential to develop our fledgling Bulawood film industry through the construction of a film studio that could position us as a Pacific hub for major film productions from China, Bollywood and Hollywood.

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