SA CAN draw useful lessons from
However, inward-looking economic policies and the neglect of these sectors by a regime fixated on heavy industry steadily eroded the country's market share and hamstrung its efforts to specialise in labour-intensive exports. In 1970,
The advent of economic reforms in the late 1970s, and their intensification in the 1980s, laid the foundations for a sustained expansion of exports. Export growth was the consequence of exploiting
Reform of the rural economy transformed the structure of textile and clothing production, with favourable outcomes. The expanded role of township and village enterprises in these industries - which had been dominated by loss-making state-owned companies - brought certain competitive strengths, including cost advantages, better governance structures, relatively hospitable work environments, and adaptability to market conditions.
Moreover, many businesses benefited from massive infusions of export-oriented investment, mainly from Hong Kong, Macau, Taiwan, the US, Korea and Japan. This enabled them to import advanced technology and equipment, which in turn contributed to their improved productive capacity and efficiency.
Faced with growing competition from township and village enterprises, and beset with financial difficulties and operational deficiencies, state-owned companies were forced to undertake structural adjustment.
Restructuring was made even more urgent by the anticipated termination of the textile and garment quota regime under the rules of the World Trade Organisation (WTO), and by
It had always been an explicit foreign economic policy goal of
It recast its industrial policy and carried out extensive recapitalisation to make sure that financial resources went to the most productive enterprises. It introduced sophisticated foreign technologies and technical knowledge. It reorganised management and operational systems and optimised the industrial structure. And it brought in foreign brands, while also improving the blend of its high-value-added export products.
But industrial restructuring was not painless. To be sure, it resulted in the closure of many factories and a loss of about 1,16-million jobs. This represented a significant adjustment for
There is no room for complacency, however. As the momentum of globalisation progresses and, in particular, as China's market-opening commitments under the WTO take effect, China's market predominance will be challenged by other competitive producers such as Vietnam, India and Indonesia. The imposition of safeguard quotas on Chinese textiles and garments by the
Besides buoying the shares of
Moreover, the Chinese textile sector still has some weaknesses, including weak innovation, insufficient investment in research and development, a lack of internationally recognised Chinese brands (products are frequently made and sold under foreign brands), inadequate technical and financial support, a shortage of raw materials such as cotton and chemical fibres, not enough labour regulations, and unfair competition in the Chinese domestic market.
There is also the problem of industry overcapacity, induced by excessive investment: the rapid rise of textile and garment exporters (between 2001 and 2005, the number of exporters increased from 21099 to more than 65000) has led to a slump in export prices. Also, the Chinese government and private sector have had to contend with the social costs of industrial reform. This has necessitated adjustment of labour market policies to ensure that retrenched workers are retrained and helped to find new jobs in other industries.
‖Dr Soko is director of Mthente Research and Consulting Services.