SA trade industry concerned about potential Chinese meltdown

Adam Orlin, CEO of Blue Strata, South Africa's integrated end-to-end import and working capital specialist, said that while an economic meltdown in China would impact on South African commodity exports, the government's recently announced Industrial Policy Action Plan (IPAP) 2013/14 and expectations of an equitable trade balance with China would also be effected.

"The IPAP 2013/14 plan aims to build a competitive manufacturing sector whereby local production would compete more effectively against imports, with strong prospects for economic growth and employment," added Orlin.

Trade data released by the South African Revenue Services for July revealed that South Africa's nett trade deficit increased by 51% to R89.37 billion compared with R59.02 billion in the same period a year earlier.

Orlin said that an economic meltdown in China's economy would widen South Africa's trade deficit significantly, putting further pressure on the government to develop a competitive manufacturing sector, with strong growth and employment prospects by 2015.

An equitable balance of trade?

The slowdown could ultimately affect South Africa's ability to create an equitable balance of trade with China in the near future. "South Africa's manufacturing capability in certain sectors has eroded over the years and, as a result, we are increasingly relying on China for manufactured goods," said Orlin.

While the meltdown is not expected to have a huge impact on South Africa's imports from China, some concerns still remain for local importing businesses. "The debt crisis in China is likely to result in tough trading conditions for the Eastern powerhouse, putting severe pressure on Chinese suppliers from a financing perspective.

"Smaller importing businesses may have to consolidate or else consider partnering with larger import and working capital businesses like Blue Strata in order meet stricter requirements from Chinese suppliers," said Orlin.

He added that while there is still uncertainty as to whether China is heading for an economic meltdown, it is hoped that the country finds a long-term solution to its economic growth challenges.

"The Chinese government has gone to great lengths to reassure the world that its economy is stabilising and should reach the Central Banks' recently revised growth target of 7.5% for the year, so this will remain an important consideration for local importers over the next few months," concluded Orlin.