Has China de-industrialisedother developing countries?

Adrian Wood (Oxford University)

and Jörg Mayer (UNCTAD)

ODID Working Paper 175, from www.qeh.ox.ac.uk

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

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

Impact of China on world average factor endowment ratios

Δ ln b * Δ ln n*Simple labour-force-weighted difference in 2000

+0.09 -0.19

Labour-force-weighted and openness-adjusted change 1980-2000

+0.06 -0.10

of labour force (b = B/L )Land (km2) per

100 workers (n = N/L )Basic-educated share

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

Endowment-effect coefficients(POLS 1980-2000)

zt

ztn

ztb

zPt

zMt unbqq lnlnln

ξb ξn

0.60 -0.30

0.77 -0.50 (53 countries)

0.60 -0.56 (91 countries)

Export ratio

Output ratio (53 countries)

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

** lnlnln nbqq nbPM

Alternative estimates of impact Labour-force-on world endowment ratios weighted

Size of impact Output -0.11on relevant ratio [-0.14; -0.07]

(in log points) Exports -0.16[-0.21; -0.11]

openness-adjusted

[-0.09; -0.05]

-0.10[-0.14; -0.07]

-0.07

Labour-force-weighted and

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

Exports Exports(53 countries) (91 countries)

Region 1980- 1990- Differ- Differ- Differ-1990 2000 ence ence ence

All developing 0.14 0.08 -0.06 -0.21 -0.12

East Asia 0.43 0.24 -0.19 -0.45 -0.34

South Asia 0.00 0.29 0.29 0.04 -0.41

Latin America 0.10 -0.07 -0.17 0.69 0.43

Middle East 0.21 0.07 -0.14 -1.00 -1.19

Sub-S Africa -0.08 0.08 0.16 -0.59 -0.02

Output (53 countries)

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