Why SA’s trade relationship with China could become cause for concern

China is sub-Saharan Africa's biggest trade partner, having surpassed the US in 2009. This has been a beneficial relationship for South Africa, but it might come back to bite us.

It is reported that bilateral trade between China and South Africa has been growing at a phenomenal rate, reaching $45.4 billion in 2011 ($32.1 billion of which were the country’s exports to China), an annual growth rate of 77 percent, according to statistics released by China Customs.

Trade ties between China and South Africa. Image credit: IndustrySA

Tourism from China has also increased over the past few years, with thousands of Chinese visiting our country. According to Statistics South Africa, at least 84 862 Chinese tourists visited in 2011.

But South Africa’s trade ties with the world’s second largest economic power could have potential risks, in light of its slowest quarterly growth rate since 2009.

China's economic growth rate has fallen to a new low, with a gross domestic product (GDP) growth of seven percent in the first three months of 2015, according to Bloomberg.

We spoke to Ravi Bathia, Primary Credit Analyst at Standard & Poor's about how the down-shift in economic momentum may affect Southern Africa.

Listen to the audio (scroll down) for more detail.

One of the benefits is that China has been a great export market and has been sucking in Africa’s commodities. It is also a big investor in terms of loans and foreign direct investment (FDI) in Africa.

Ravi Bathia, Primary Credit Analyst at Standard & Poor's

Africa has become more reliant on China. The slowness of China’s economy has fed into commodity prices, which has had an impact on exports through the price and volume effect.

Ravi Bathia, Primary Credit Analyst at Standard & Poor's

There might be some tempering in terms of the amount of borrowing capacity of that emerging Africa has and how much it can lend.

Ravi Bathia, Primary Credit Analyst at Standard & Poor's

It has been a positive story, but basically we now are seeing some potential risks there. Potentially now, there may be less money to repay loans.

Ravi Bathia, Primary Credit Analyst at Standard & Poor's

This may affect emerging Africa more than South Africa, an advanced emerging market.

Ravi Bathia, Primary Credit Analyst at Standard & Poor's

This article first appeared on 702 : Why SA’s trade relationship with China could become cause for concern


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