China in Africa
15 August 2013
More than 80 of China's leading fund managers held a groundbreaking meeting with the JSE last week, at which it was emphasised that China sees greater co-operation with SA's financial markets as a gateway to the rest of Africa.
An SA-China Capital Markets Forum was formed to develop greater investment flows between the two countries. Li Wei, chairman of Qilu Securities, said Chinese capital markets had expanded in the past decade. Tradable instruments had increased but co-operation with other emerging markets was still at an early stage. "Chinese companies are now taking active steps to go abroad and develop markets," said Li.
Frontier Advisory CEO Martyn Davies said this fitted China's next growth phase, as the demand for African resources had to be coupled with more sophisticated market trading mechanisms. "SA and the JSE are ideally positioned to facilitate this trend," he said. China's challenge was that its growth had become too expensive. For every US dollar of its growth, debt of $4-$5 was required. "China is expected to become Africa's dominant trading partner by 2018, replacing the US and eurozone countries," Davies predicted.
China's traditional bias towards cheap manufacturing and exports is changing. About 18m Chinese jobs have been lost to lower-wage countries. African countries could also gain from lower-wage manufacturing.
Speakers emphasised that both countries needed to build on the SA-China memorandum of understanding signed in 2002, which laid the foundation for greater co-operation in capital markets.
The new forum kicked off with a JSE- signed letter of intent for an index product licence with Chinese fund manager GF Fund Management to create exchange traded funds based on the JSE Top 40 index. Chinese investors can currently trade JSE Top 40 derivative products only in Hong Kong dollars on the Hong Kong Future Exchange.
JSE market data director Ana Forssman said this would allow for the first direct launch from SA of an exchange traded product in Asia. "Chinese investors will have exposure to SA companies while giving our companies exposure in an important emerging market."