Government needs to oppose all forms of protectionism to speed up recovery from the global financial crisis, members of Parliament were told by a Chinese parliamentary delegation on Tuesday. The group suggested that by countries opening up their trade the global spread of economic failure can be stalled.
“All governments around the world should work together and coordinate their policy and macro-economic directions,” Shi Xiushi, head of the Chinese delegation and chairperson of the financial and economic affairs committee of the National People’s Congress (NPC), said. “This will help to prevent the entire world from becoming infected when the developed countries get ill,” he added.
The delegation met with South African members of parliament serving on the standing committee on finance to share the two countries’ experiences of the on-going global economic recession and exchange ideas for faster recovery.
The global financial crisis has had an unexpected impact on China, pushing down its economic growth rate by 1.8 percentage points in the first half of 2012, Shi said. “For the first time in years, China’s economic growth rate fell below 8% and the impact of the global financial crisis will be felt for a long time to come.”
External factors that prolong the recession include the lower than expected growth rate of most world economies and the spreading of the European debt crisis, which has lowered the demand for Chinese goods. Exports have decreased as a result. Demand among Chinese consumers has also taken a tumble as a consequence of weaker spending power.
But the Chinese government has played an active role in trying to contain the impact of the financial crisis, among other things by increasing government public spending on infrastructure and cutting taxes and more than 100 administrative fees to help accelerate the growth of Chinese businesses. This helped to create employment and China has contained its 4.5%-unemployment rate.
South Africa’s most pressing problem is that its budget deficit is growing, Thaba Mufamadi, chair of the standing committee on finance, said. “We’ve also been downgraded by Moody’s which will have a negative effect on all economic sectors, including banks.” Mufamadi ascribed the downgrade to South Africa’s failure to deal effectively with unemployment, especially among the youth, and employer-employee tensions. “The strikes in the mining sector are affecting the revenue earnings in the mineral sector in a negative way.”
DA MP Tim Harris lauded the Chinese government’s efforts to mitigate the effects of the global financial crisis, especially tax cuts and the lowering of administrative fees.
“We call on Finance Minister Pravin Gordhan to emulate this approach in the upcoming Medium Term Budget Policy Statement,” Harris said.