Has China de-industrialised other developing countries?

1
Has China de-industrialisedother developing
countries?

• Adrian Wood (Oxford University)
• and Jörg Mayer (UNCTAD)
• ODID Working Paper 175, from www.qeh.ox.ac.uk

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World-wide worries

• Two traded sectors that matter most to DCs
• Labour-intensive manufacturing China hurt
• Primary (agr and mining) China has boosted
• Possible adverse effects on DC development
• Retarded industrialisation
• Reduced employment
• Increased inequality
• Reported in Asia, Africa and Latin America

3
Our Heckscher-Ohlin approach

• Insights from H-O theory
• Endowments shape comparative advantage
• Chinas entry altered world average endowments
• So moved everyone elses CA away from its CA
• Key question is magnitude size of this impact
• Three-step calculation
• Effect of China on world average endowments
• Effect of endowments on export/output structure
• Multiply results of step 1 by results of step 2

4
Impact of China on world average factor endowment
ratios
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Effect of endowments on sectoral structure of
exports and output

• Variable of interest (qz) is ratio of
  labour-intensive manufactures to broad primary
• What we would ideally want to estimate
• ?v ? ?p ? ?qz
• What we were actually able to estimate
• ?vz ? ?qz
• Theoretical reasons why similar in size

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Endowment-effect coefficients(POLS 1980-2000)
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Predicted impact of China on sectoral structure
of an average other country
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Changes in logged ratios of lab-int mfg to
primary, 1980-2000, regional averages
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Our conclusions

• Yes, China has de-industrialised other DCs
• But on average not by enough to worry about
• Impacts larger for some countries and goods
• Chinas opening was a step-change shock
• Longer-term effects of Chinas rapid growth
• Rising demand for primary goods will continue
• But later on will boost lab-int mfg in other DCs,
  contrary to the impact of its initial opening