By Chris Alden

TEN years of official diplomatic relations between the People's Republic of China and SA have been marked by a series of commemorative events in both countries.

From a period of no official ties between the South African or Chinese governments, the relationship has subsequently grown to become one of the closest to be found between African and Asian states.

Underpinning warm ties between both countries is growing economic engagement, which has put SA among China's top trading partners on the continent.

With the recognition of China in 1998, SA entered a new era characterised by a re-orientation of its diplomacy, and increasingly its economy, away from a sole focus on Europe and North America. SA's positions on the reform of international institutions and its stance on matters such as Darfur and Burma in the United Nations Security Council mirror those of China, another indication of a shared outlook on the global system. These close diplomatic ties have been matched by growing economic engagement.

With two-way trade rising from R5,2bn in 1998 to R72,9bn in October last year, economic co-operation is being realised at ever-increasing rates. Moreover, the once low levels of Chinese investment into SA are finally catching up with the high-profile South African investment in China.

In particular, Chinese foreign direct investment reached new heights with the announcement in November last year that the Industrial and Commercial Bank of China would be purchasing a 20% stake in Standard Bank worth R36,7bn. And, with Chinese demand for foodstuffs growing exponentially, the potential for further development of commercial links between SA and China exists.

At the same time, the deepening of economic ties with China has raised important questions about the uneven effect of trade in certain sectors of the South African economy -- with domestically produced textiles experiencing sharp reductions, while exports of South African agricultural products are soaring -- and has created challenges for China and SA alike.

The emphasis of Sino-South African trade has been on the Chinese securing minerals, agricultural goods and related commodities, while SA has absorbed imports of low-end consumer goods. This is, however, changing and we are beginning to see higher value-added products from China, such as motor vehicles and white goods, entering the domestic market.

It is a measure of the sensitivity of trade relations that the Chinese government agreed to impose unilateral restrictions on its own textile and clothing exports to give SA's manufacturers time to retool their operations in anticipation of a reopening of trade in this sector.

While strong bilateral engagement between SA and China is at the heart of the relationship, the opportunities for greater co-operation in Africa itself are manifold. On this, the rolling out of Chinese-backed infrastructure across the continent -- too often characterised in the domestic press as an outright loss for South African interests and companies -- should be recognised for what it is: an unprecedented step aimed at addressing a key obstacle to African development. Indeed, given World Bank estimates that Africa has an infrastructure backlog measured at more than $32bn, the Chinese role is one of contributing to addressing this issue and leaves plenty of opportunity for others, especially South Africans, to play a significant role.

Evidence from Ethiopia to Angola, where Chinese firms have built transport and communication infrastructure, already links these initiatives to increased economic growth in those countries. At the same time, Chinese competitiveness is a phenomenon that is raising concerns, not only in certain circles in SA but increasingly across the continent as well.

While talk of a "deindustrialisation" of Africa is certainly exaggerated, there are nonetheless very real fears that in some areas, Africa's hard-fought gains in manufacturing will fall victim to the economic juggernaut that is contemporary China. The Chinese are well aware of this problem, as the textile case in SA suggests, and have begun to introduce steps such as zero tariff rating on selected goods from Africa's poorest countries.

Other aspects of China's engagement are raising eyebrows in African capitals as well. In particular, the role of Chinese weapons sales in established arenas of conflict is increasingly viewed as problematic.

Relations between SA and China are fast becoming the linchpin of a new, invigorated form of south-south co-operation. This diplomatic collaboration, coupled to its strong economic foundation, is proving to be one of the drivers of growth in Africa. Managing these factors against a backdrop of mutual co-operation and shared hopes for African development is the key challenge for this maturing relationship.

Dr Alden is the director of the China in Africa Project at the South African Institute of International Affairs and author of the book, China in Africa.

Published on the web by Business Day on June 18, 2008.