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

2. 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 • China’s entry altered world average endowments • So moved everyone else’s 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

5. 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: Δv* → Δp* →Δqz • What we were actually able to estimate Δvz → Δqz • Theoretical reasons why similar in size

6. Endowment-effect coefficients(POLS 1980-2000)

7. Predicted impact of China on sectoral structure of an average other country

8. Changes in logged ratios of lab-int mfg to primary, 1980-2000, regional averages

9. 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 • China’s opening was a step-change shock • Longer-term effects of China’s 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