China’s market fall poses a greater risk to Africa than the Greece Crisis. But the continent can benefit from both.
Amid dominating speculations on the Greece Crisis and its spill over effects, the Chinese market plummeted more than 20 per cent from its 12 June peak.
According to Chris Gilmour, Investment Analyst for ABSA Investments, “The fall we’ve had in the Chinese stock exchange, 3.2 trillion dollars’ worth, is equivalent to the entire economy of Brazil in the space of three weeks.”
Gilmour substantiated that this is the biggest market in the world in terms of market capitalisation after the New York Stock Exchange and the NASDAQ which provides context on how significant the fall is.
Matthew Birtch, lecturer of strategic management at Gordon Institute of Business Science, said the geopolitical dynamics surrounding Greece and China present a great opportunity for Sub-Saharan Africa “to play off both”.
Birtch explained, “We saw more military bases from Sub-Saharan Africa in the US, but most of the economic influence from China.”
A lot of strategic thinking is called for from Africa in how it will leverage these relationships, especially in what it keeps out and what it allows in, he said.
Birtch advised that South Africa stay aligned very closely to the Chinese in terms of how it leverages the Chinese loans and structures. A visible hindrance is that South Africa needs to get its policy agenda right because policy uncertainty drives away investment, not the policy you have.
Birtch weighed in that China has become so heavily integrated in the world economy that if Europe and America are not doing well, China is likely to feel the sting too. Five years ago this was not the case, he said.
“They [China] want Greece to stay in the Euro as they own large parts of Greece, 51 per cent of the ports are owned by Chinese companies in Greece," Birtch told CNBC Africa.
Gilmour said China is an unstable territory, he further added that, “The Chinese growth miracle that started in 1979 is petering out and it’s largely because of the one child policy, in a country where you have 1.4 billion people that’s as far as you can get.”