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INTERNATIONAL TRADE: SA, China Dependent On Each Other

 



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South Africa and the rest of Africa’s economies are dependent on that of China, while this Asian powerhouse is dependent on the supply of commodities from the continent both now and into the future.  China, Africa’s second biggest trading partner, is experiencing a slowing in its growth rate, but it is heading for an upswing, with the continent following suit owing to the mutual interest in each other.

 

These were some of the views from Dr Martyn Davies, executive director of the Centre for Chinese Studies, Stellenbosch University, and CEO of Frontier Advisory. He was speaking at the University of Stellenbosch Business School’s (USB) Leader’s Angle talk series to business people, alumni, students and academics. Davies is also a part-time lecturer at the USB, where he lectures two elective modules on the MBA programme – Business Strategy in China and Business Strategy in Emerging Market Economies.

 

“Not long ago China was seen as a ‘free-loader’ in the global economy, but since its involvement in Africa it has gone from ‘demon to sudden saviour’. There is a new coupling taking place between Africa’s growth and that of China. There has been a trend correlation from 1996 between South Africa and China with an exact correlation from 1999. This is the result of a new Africa policy of China which stipulates a demand for commodities such as minerals, iron ore and other metals,” said Davies.

 

This demand for African commodities stems not only from big cities like Shanghai, but even second- and third-tier cities in China, which are experiencing rapid growth in infrastructure.

 

He explained that the grand plan of China and countries in Asia is to cause a major disruption of markets. “Their aim is to disrupt the current trading system and to acquire commodities at the source and to control the asset. He who controls the asset controls the market.

 

“I predict in 10 - 20 years there will be continuous market disruption from China. How? If you own the banking system as well as mining companies it is possible,” warned Davies.

 

He criticised the view of South Africans who still see China in a negative light as a backward communist country. “Our view of China is three decades old. There is an enormous amount of negativity which is misplaced.”

 

An example of this is the rumoured ‘Asian tsunami’ of cheap Chinese imports which harmed the local textile industry. Davies asked how South Africa can be expected to compete with roughly 35 000 clothing factories in China, if Mexico, Brazil and other countries cannot even compete.

 

He said South Africans prefer to visit cities like London and other western countries because they are more familiar with the language. They are also “detached from the rest of the continent” and in this way are losing out on many opportunities which the Chinese are seeing and taking.

 

Davies said, unlike Europeans who colonised Africa and pretended not to want to make money, China uses a different development model which is clear on profit-making.

 

He points to China’s investment of billions of dollars into African countries such as Angola, Sudan, Nigeria and Zimbabwe for the building of roads, infrastructure and railway lines along with the development of special economic zones. “These zones are like China towns on commercial steroids,” said Davies jokingly.

 

“China might have a slump in economic growth now, but I don’t believe it will slow down [further]. This country has been very resistant to crises such as the Tiananmen Square uprisings and the SARS virus outbreak, but the biggest fear of Chinese leadership is social uprising due to the rising differential between the rich and the poor in that country,” said Davies.

 

He said the Chinese intent is clear, that is to change the rules of the global game. There is a different perspective in China on how the world should be run, Davies concluded.

 

The USB’s Leader’s Angle talks on all aspects of leadership, presented in association with Finweek are an outflow of its strong focus on leadership development in its MBA, its executive education programmes, and its research on leadership.

 
 
 
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