The impact of China imports on employment in the South African textile industry.

Abstract

Abstract This research report provides some empirical perspective on the impact of Chinese imports on employment levels in the South African textile industry. South African imports data, employment data and exchange rate (South African Rand per Chinese Yuan) for the period 1993 to 2011 is used to analyse the relationship between high level of imports from China and employment levels in the industry. The research report concludes that an increase in the value of textile imports from China will cause a decline in employment levels in the South African textile industry. A weak rand also has a negative impact on the level of employment although an appreciation in the rand does not necessarily improve employment levels. While the data analysed provides evidence of the negative and significant relationship between the variables being studied, the literature reviewed also provide evidence that imposing quantitative import restrictions such as import quotas as well as high labour rates also indirectly have a negative impact on employment levels as import quotas, as confirmed in the study by Van Eeden (2009) can lead to an increase in the value of imports thereby reducing employment levels, while high labour costs can reduce productivity of domestic products which leads to a high demand in imported goods, consequently reducing employment levels. Trade liberalisation has also been blamed for causing employment crisis in the textile sector since it promotes an influx of imports. The research report recommends that South Africa must focus on reducing the labour costs, investing on skills development, managing the imposition of tariffs, banning import quotas, attracting Foreign Direct Investments, specialising in highly competitive textile products and putting in place a long-term strategy for the industry.