Speaking during a state visit to China in early September, President Cyril Ramaphosa praised the increase in bilateral trade between China and SA, but appealed for measures to ‘narrow the trade deficit and address the structure of trade’. His visit came at a time when SA-China business relations were expanding. China’s exports to SA grew at an annualised rate of nearly 9% between 2017 and 2022.

China is SA’s biggest international trade partner. In July 2024, China accounted for 11.6% of SA’s exports but supplied 23.1% of its imports. However, it is the structure of this trade that worries Ramaphosa.

SA’s exports to China (worth $12.4 billion in 2023, according to the UN Comtrade database) include mostly raw materials, but it gets back manufactured goods, some of them made using those very same raw materials. While SA’s main exports are platinum, gold, iron ore and manganese, China is selling back broadcasting equipment, computers, electric batteries and, recently, automobiles.

Over the past two years, Chinese-made automobiles have had a massive impact on the SA market. Haval, a sports utility vehicle brand owned by Great Wall Motors, sold 19 000 units in SA in 2023, up from a mere 872 in 2019. By contrast, combined Audi, Mercedes-Benz and BMW sales in 2023 were only 26 000, less than half of what they were a decade ago.

Ramaphosa would like to see the Haval, alongside other Chinese brands, such as Chery and BAIC, made in SA. While there are Chinese car assembly plants in Durban and Gqeberha, most Chinese vehicles sold into the SA market are imported.

‘The problem is that China can produce manufactured goods more cheaply than any other country,’ says Ross Harvey, director of research and programmes at Good Governance Africa. He adds that the Chinese industrial system is ‘opaque’ by comparison with especially the developed countries of the West, and that it is riddled with various forms of direct and indirect subsidies.

Harvey does not expect big changes to the structure of SA-China trade. ‘It’s very expensive to manufacture in South Africa, and there are other issues like energy security, crime and logistics. South Africa has to work on getting the preconditions right,’ he says.

The rise of China as an economic powerhouse over the last three decades has implications for the rest of the world. China is the world’s largest market and, soon after diplomatic links with SA were created in 1998, some of the established players moved to take advantage. SA’s Naspers, which now describes itself as a global consumer internet group but was then simply a local media company, clinched the flagship deal. It bought 46.5% of Tencent, a Chinese internet company and owner of YouChat, for $32 million in 2001. That shareholding has, since 2019, been listed in Amsterdam as Prosus, and has increased 100-fold in value.

Unable to compete with China, the tendency is for countries to retreat behind tariff barriers to protect domestic manufacturing. Earlier this year, SA imposed a 10% duty on imports of Chinese-made solar panels in order to protect this infant domestic industry.

Tariffs are a sensitive issue in international trade. But they appear to be inevitable in a system where few countries can compete with Factory China. The process of protecting local industries while retaining access to the Chinese market requires what Harvey describes as ‘a delicate balancing act’. He adds that the prospects of SA competing directly with China in almost every sphere of manufacturing are slim, but that there are other areas where the relationship can be productive – notably infrastructure development and corporate interactions.

SA’s relationship with China has deepened considerably since the two countries established diplomatic links in 1998. In 2010, SA became the fifth member of the BRICS (Brazil, Russia, India, China, SA) partnership. Trade negotiations do not happen within BRICS, but the annual summit meetings of the partnership are important in setting the overall tone. And some important bilateral agreements originate in discussions on the fringes of these events.

Earlier this year, speaking at an event to celebrate SA bank Absa’s opening an office in his country, China’s ambassador to SA, Chen Xiaodong, said the two countries were actively pursuing greater synergy in their economic relationship. ‘We are expanding ways to deepen win-win co-operation in infrastructure, energy and minerals, new energy, finance, agriculture and other fields. We hope South African companies will actively explore new products and modes of trade and investment between the two sides,’ he said.

Chinese construction companies have turned their attention to SA in recent years. Two of the country’s biggest infrastructure projects, the Mtentu bridge in the Transkei (R4.05 billion) and the EB Cloete interchange on the N3 outside Durban (R4.1 billion) have been awarded by the South African National Roads Agency to joint ventures dominated by Chinese partners.

Ramaphosa appears to be determined to deepen the relationship. In a speech to the Shenzhen Business Roundtable during his recent visit, he spoke warmly of China as an example to SA.

‘South Africa has embarked on its own reforms. In one of the key areas, energy and electricity, we took lessons from how China has restructured its electricity sector. South Africa is following on China’s footsteps. You [China] stand out as a good teacher.’

Ramaphosa said he wants Chinese companies ‘to do more in South Africa’, specifically mentioning energy, technology and automotive manufacturing, and appealing for investment and an exchange of knowledge in these sectors.

From an SA perspective, the most productive immediate area of engagement is probably agriculture. China is the world’s largest importer of agricultural products, according to the US Foreign Agricultural Service. However, market access has not necessarily been easy, as China imposes rigorous health and safety standards.

Wandile Sihlobo, chief economist at the Agricultural Business Chamber of South Africa, says China accounts for 11% of global agricultural imports, valued at $200 billion. SA has steadily grown its share of this market over the past decade but is still in a position where it can utilise greater market access. According to Sihlobo, it currently accounts for a mere 0.4% of China’s agricultural imports.

Among the main barriers are China’s strict phytosanitary protocols. These need to be dealt with one crop type at a time. However, high-level engagements such as September’s can provide impetus to the efforts of administrators who actually design these systems. This was finally achieved for SA avocado exports this year. The two countries agreed on an Avocado Work Plan, which put in place conditions such as 19 days cold treatment at 2°C for SA exports. Initial agreement was reached on the sidelines of last year’s BRICS summit.

Chinese economic growth has faltered a bit since COVID-19, but it is still the world’s largest rising economy, and SA’s close relationship gives it an inside track for more deals.

By David Christianson