Flying with the Dragon: Estimating Developing Countries’ Gains from China's Imports

Abstract

As a large trading nation, China competes with importing countries’ domestic and third‐country markets but also creates growth opportunities for exporters. Most studies on China trade shocks or “China shocks” focuse on the impacts of import competition on developed economies. The present paper complements research on China shocks by exploring the other side of the trade exposure to China – China as the largest importer, rather than as an exporter. We analyze the effects of export expansion into China on the local labor markets of the exporting developing countries for the years 1992 to 2018. Using detailed export and employment data, we estimate employment pattern variations in manufacturing industries with exports from other developing countries as instruments for export exposure. We find that the increase in trade exposure to China in the world economy has caused extensive job gains in manufacturing industries in developing countries that were exporters. On average, our estimations show that this trade exposure created approximately 1.5 million additional jobs from 1992 to 2018, which made an important contribution to manufacturing industries in developing countries. Our empirical analysis also shows that trade had stabilizing effects on employment in the countries in our sample generally.

How Do China's Importing Firms Respond to Non‐tariff Measures?

“…On the other hand, developing economies have fewer alternative export markets and greater space for improvement in productive technology and product quality, and hence the exporters in developing countries have more incentives and greater motivation to improve product quality to meet China's new standards. Qian et al (2020) showed that China, as the largest importer, creates jobs and growth opportunities in manufacturing industries for the exporting developing countries. We therefore aim to examine the specific impact of China's public policy NTMs on the intermediate imports sourced from different economies.…”

“…improvement in productive technology and product quality, and hence the exporters in developing countries have more incentives and greater motivation to improve product quality to meet China's new standards Qian et al (2020). showed that China, as the largest importer, creates jobs and growth opportunities in manufacturing industries for ©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences the exporting developing countries.columns (1) and (2) show that both types of Chinese NTMs give rise to an additional range of import varieties of intermediates at the whole product level.…”