The Chinese Financial System and Global Economic Stability IV - The Chinese-South African Economic Relationship

The fourth Brief in the series sets out the economic interests in the system.

South Africa’s economic relationship with China can be summed up under three headings: trade, asset holdings in each other’s economies and China’s economic interest in South Africa.

1. Trade 

The table below sets outs the fundamentals of South African merchandise trade with China since 2010:


2010 2011 2012 2013 2014 2015*
SA exports to China (US$ million) 8 065 12 507 10 316 12 059 8 758  
SA imports from China (US$ million) 11 458 14 222 14 612 16 007 15 457  
Exchange rate (Rand per yuan) 1.08 1.12 1.30 1.57 1.76 2.01
IMF Metals dollar price index (2005=100) 202 230 191 183 164 136


Data from the South African Revenue Services, the Reserve Bank’s Quarterly Bulletin and the IMF. The 2015 exchange rate refers to the position on 17 August and the metals price index to the second quarter.

The Rand has depreciated by nearly half against the yuan in the last five years. The dollar value of exports to China will depend on commodity prices, particularly metal prices. Just over two-thirds of South African exports fell into the single category of ‘mineral products’ in 2014. The current severe ‘commodity bust’ is the single most important factor currently in the evolution of SA exports to China. There may be a modest further depreciation of the yuan and some slowing in China’s growth, which influence our exports in opposite directions. The IMF’s economic outlook project China’s growth in 2016 at 6.3%, compared with 6.8% in 2015 and 7.4% in 2014.  

On the other hand, imports from China will depend on South African economic growth and the rand-yuan exchange rate. Nearly all our imports consist of industrial inputs and final manufactured goods. Just under half consisted of machinery, which has become considerably more expensive in rand terms.

2. Asset Holdings 

The pattern may be summarised as follows:

  • South African liabilities and assets in relation to China mainly take the form of direct investment. Portfolio investment both ways is very low and financial holdings each way are roughly similar;
  • South Africa assets in China greatly exceed Chinese assets in South Africa. Moreover, South African assets in China have been growing fast. In dollar terms, the value of Chinese assets in South Africa flat-lined at about US $7.5 billion between 2011 and 2013, while  South African assets in China have risen from US $ 16 billion to US $ 46 billion over the same period. At this level, we have a greater stake in the Chinese economy than they have in ours.   

3. China’s economic interest in South Africa

Some have sought to discover a ‘Beijing economic consensus’ as a counterpart to the ‘Washington economic consensus’. They have searched in vain: such a contrast betrays Cold War thinking, of which the Washington consensus, now obsolete, was the last enchantment. We are now in a diplomatic world akin to the nineteenth century, where countries have permanent interests, but not permanent friends. In the context of China-South African relations, fraternal greetings between the communist parties in the two countries may be part of diplomatic politesse, but they count for nothing in relation to economic interests.

Chinese economic interests in South Africa have two main components:  

  • Minerals, especially those in which South Africa has a large share in known international reserves. The facts of geology are constant, but knowledge of it increases and known reserves increase. Moreover, exploitable resources change with economic circumstances. For now, the current travails in the mining industry which make it inefficient are not in Chinese interests.
  • Financial, in so far as South Africa opens up financial relations with sub-Saharan Africa. Hence the acquisition of a stake in Standard Bank. But China is pursuing other opportunities in other countries, and will adjust its stakes in line with performance. South Africa either delivers, or it will be outflanked.

R W Johnson is right to observe that the current fecklessness in South African economic policy - graced as the intensified second phase of the first stage of the national democratic revolution – is creating its nemesis in the form of structural adjustment down the line. The ever greater search for rents, the hollowing out of state owned corporations and public institutions, deterioration in indices of corruption and undermining of property rights essential to support production – and all this, when the warning lights on the South African economic dashboard are lighting up – is creating a mess which is not in Chinese interests. They will not bail such a configuration out, either through the BRICS bank, or in any other way. Instead, they will join a growing international movement in support of South Africa policy reform. To suppose otherwise will mean joining the tradition of the Melanesian cargo cult of the late nineteenth century, with as little prospect of success.

Charles Simkins
Senior Researcher