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South Africa gives China platform on trade as Brics meet

Jul 25 2018 10:22
Amogelang Mbatha and Ana Monteiro, Bloomberg

South Africa is likely this week to provide a platform for a Chinese-led fightback against Donald Trump's protectionist agenda as it hosts counterparts of the so-called Brics group of nations.

The annual summit of the coterie of emerging economic powers, first identified by former Goldman Sachs Asset Management Chairman Jim O'Neill, is the 10th since its leaders started meeting, and the first since the prospect of a full-blown global trade war became a real threat. The BRICS group encompasses Brazil, Russia, India, China and South Africa.

Chinese President Xi Jinping has already used his visit to the country to forge friendships and consolidate influence with multi-billion dollar investments in Africa, including South Africa, which counts China as its biggest trading partner.

Xi’s country has the most at stake in a potential trade conflict, accounting for the bulk of the combined gross domestic product of about $17trn that BRICS represents.

"I expect to see a bold, sweeping statement led by the Chinese side that will condemn protectionism and de-globalization with an intent to keep the global trading regime intact and predictable," Martyn Davies, managing director for emerging markets and Africa at Deloitte, said by phone. "Access to the global economy through trade has underpinned China’s economic success over the past 2 1/2 decades."

O’Neill coined the Bric term in 2001 to describe the four emerging powers he estimated would equal the US in joint economic output by 2020. Brazil, Russia, India and China invited South Africa to join the group in December 2010. The five countries’ GDP is now more than 90% the size of US output. While they have combined foreign-exchange reserves of $4trn, the group’s currencies, stocks and bonds took a hit from the trade war and Fed policy tightening.

Xi’s counterparts from Russia, Brazil and India will join him at the summit, as will Turkish President Recep Tayyip Erdogan and African leaders such as Angola’s Joao Lourenco and Zambia’s Edgar Lungu.

"China is the most important trade country in this coalition, and is likely to offset the negative impact from greater US protectionism through increased domestic stimulus," Madhur Jha, head of thematic research at Standard Chartered Bank, said in response to emailed questions.

The BRICS nations would "reiterate their own domestic agendas at this meeting as well as commit to more trade and investment among these countries," she said.

On Tuesday, China pledged to invest $14.7bn in South Africa and grant loans to its state power utility and logistics company. The rand gained on the back of the announcement, and traded a further 0.2% stronger at R13.25/$ at 08:55 on Wednesday.

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brics2018  |  xi jinping  |  donald trump  |  trade wars  |  brics


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