THE RISK OF GLOBAL FINANCIAL MARKETS: THE CASE OF CHINA IN A DEVELOPING COUNTRY

Download This Article

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Abstract

Globalization has forced many countries to rely on one another for products and services which they are unable to source locally. More so, trade is used as the channel to procure those. South Africa and China share very close relations which are boosted by South Africa’s neo-liberal policy, and its membership of the BRICS bloc. Often, this relationship has been subjected to different interpretations leading to the inability to reach a consensus on South Africa’s intention and exact benefits from neo-liberalization and membership of BRICS bloc. On this basis, we affirm that a notable gap exists in scholarly literature which has not provided the full-fledged understanding of the impact of Chinese manufactured goods into South Africa. We draw from the concepts of protectionism and free trade to expatiate the concerns raised by many with respect to the nature and benefits of the relationship. The paper relied extensively on secondary sources of data from which the authors then analyzed, interpreted and drew conclusions to provide a contextual explanation of the phenomenon of Chinese invasion of South African market. This method was useful for two reasons; namely its capacity to generate new insights and secondly, access to comparative studies. While the results show that South African clothing firms are increasingly shutting down because of lower prices from international competitors (especially China), and also due to structural issues of the present South African economy, we are equally aware of the extensive pressure from interest groups for the South African government to protect major local industries such as steel and textile. We argue anyway that the South African government is playing its cards carefully to avoid a backlash, especially considering its position within the BRICS bloc.

Keywords: BRICS, Protectionism, Free Trade, South Africa, China, Neo-Liberalism, World Trade Organisation

Date received: 18 November 2016

Date accepted: 27 January 2017

How to cite this paper: Kum, P. N., Iwu, C. G., Umezurike, S. A. (2017). The risk of global financial markets: The case of China in a developing country. Risk governance & control: Financial markets & institutions, 7(1), 46-53. https://doi.org/10.22495/rgcv7i1art6