South African trade with China – a (slight) silver lining

The latest trade statistics for China and South Africa may be the first signs of the coronavirus hitting our economy, but experts say the bigger test is yet to come over the next few months.

According to the latest data from the South African Revenue Service, South Africa imported fewer Chinese goods in January this year than it did in January 2019, with a difference of around R3 billion.

Imports from China to South Africa went from R23,5 billion for the month of January 2019, to R20,5 billion for January 2020. Exports, however, increased to R11,8 billion for the month of January 2020 compared to R10,5 billion in January 2019.

According to Erwin Pon, head of East Asia Business at Rand Merchant Bank, these numbers were expected because of the widespread closures of factories in China following the outbreak of the novel coronavirus.

“In general, we have definitely seen a negative impact on the economy with many supply chains and businesses being disrupted, ” said Pon.

Chinese factories were only recently and slowly getting back to full operations with many still either being inactive or at limited capacity. Shipments and logistics had also been impacted and culminating in decreased imports from China.

There were however a couple of positives for South Africa at least, he added. With the delay in factories, shops and businesses opening in China, there was a gap in the market and South African companies were taking up this opportunity to export more.

Certain goods such as various citrus, fruits and nuts were in very high demand. Pom had also seen a sharp increase in exports of other foods stuff as well as wood pulp and paper products etc.

Economist Dawie Roodt said overall trade numbers were expected to reflect the economic and logistical constraints posed by the coronavirus pandemic over the next few months. South Africa’s latest Gross Domestic Product (GDP) data was expected to be released today, while China’s GDP was projected to shrink by as much 6 % this year, possibly dragging other economies down with it.

“I am not surprised. These may be the first omen but I cannot say that these numbers will have been that affected by the virus yet. I would predict that our tourism numbers will reflect a much quicker reaction. But the one on slow domestic imports makes sense because of the pressure on the Rand and local economy is under tremendous pressure at the moment. But over the next number of months we may start to see a significant slow-down in imports from China.”

According to Bloomberg, Pacific Investment Management Co. predicted China’s GDP contraction, which would be at a quarterly annualized rate, would push down year-on-year growth to 3%, compared with 6%.

According to Roodt, it was expected that other major economies like the European Union and the USA were expected to experience recession-like conditions this year, which was likely to add more pressure on South Africa’s open and vulnerable economy.

Simnikiweh@citizen.co.za

For more news your way, download The Citizen’s app for iOS and Android.