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

• Author: Yingna Wu,Xuefeng Qian,Kalsoom Rafique
• Date: 01 September 2020
• Published date: 01 September 2020
• DOI: http://doi.org/10.1111/cwe.12338

©2020 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 1–25, Vol. 28, No. 5, 2020 1

*Xuefeng Qian, Professor, Zhongnan University of Economics and Law, China. Email: xfqian@zuel.edu.cn;

Kalsoom Rafique, PhD Candidate, Zhongnan University of Economics and Law, China. Email: kalsoom210@

outlook.com; Yingna Wu (corresponding author), Associate Professor, Zhongnan University of Economics and Law,

China. Email: wuyingna@zuel.edu.cn. The authors acknowledge fi nancial support from the major special project

of the National Social Science Fund of China (No. 18VSJ046) and the postgraduate education research project of

Zhongnan University of Economics and Law (No. 201821003).

Flying with the Dragon: Estimating Developing

Countries’ Gains from China’s Imports

Xuefeng Qian, Kalsoom Rafi que, Yingna Wu*

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 fi nd 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.

Key words: China shocks, developing countries, export exposure, gains from trade,

manufacturing employment

JEL codes: F14, F16, J23, O10

I. Introduction

China’s increasing role in international trade has been a major force for globalization in

recent decades. The signifi cant trade volume between developed countries and China,

Xuefeng Qian et al. / 1–25, Vol. 28, No. 5, 2020

©2020 Institute of World Economics and Politics, Chinese Academy of Social Sciences

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and the impact of import competition on their local labor markets have generated a

growing body of literature. Autor et al. (2013) concluded that increasing imports from

China initiated an increase in unemployment and reduced wages in US local labor

markets that hosted import-competing manufacturing industries. Many other researchers

employed a similar methodology to study the import competition effect in Germany

(Dauth et al., 2014, 2018), Spain (Donoso et al., 2015), Portugal (Pereira, 2016), France

(Malgouyres, 2017) and the Organisation for Economic Co-operation and Development

(OECD) countries (Thewissen and van Vliet, 2019), and reached similar conclusions.

More recently, Liu et al. (2018) argued that different quality variety had to be considered

when investigating whether China’s exports crowded out those from other countries.

Feenstra et al. (2019) revisited the labor market effects of Chinese import competition

and argued that they were mainly offset by the global expansion of US exports through

supply-chain linkage. Although China’s impact on developing economies is beginning

to be appreciated (Devlin et al., 2006; Eichengreen and Tong, 2007; Lopez et al., 2008),

the gains by developing countries from China’s imports are still under-researched.

The term “China shocks” in the trade literature usually refers to import competition

from China, which is a supply-side shock from China. However, trade involves both

imports and exports. Besides China supply shocks, China demand shocks, driven by

its growing purchasing power, also deserve attention from economists. China’s imports

have increased from US$80.59 bi llion in 1992 to US$2.134 trillion in 2018 – an increase

of 2,549 percent. During the same period, China’s imports from our selected group of

developing countries exhibited an unprecedented rise from a tiny amount of US$4.35 billion

in 1992 to US$27.12 billion in 2001 and then US$345.15 billion in 2018.1 In this paper, we

study the demand-side effects of China shocks by analyzing the impacts of the expansion

of exports from developing economies into China. Manufacturing employment patterns

vary at the country level. Countries are exposed in different ways to export opportunities

that arise from China demand shocks. We conduct empirical analyses to discuss changes in

local labor markets and consider how they can be used to measure export exposure.

The mainstream literature concentrates on the effects of trade supply shocks from

China on developed countries (Chiquiar, 2008; Kovak, 2011; Autor et al., 2013). Their

1This is the authors’ own calculation for a selected group of developing countries based on data from the

World Integrated Trade Solution (WITS). It is a group of 38 developing countries including Armenia,

Azerbaijan, Bangladesh, Barbados, Bhutan, Fiji, Gabon, Georgia, India, Indonesia, Islamic Republic of Iran,

Iraq, Kazakhstan, Kuwait, Kyrgyzstan, Lebanon, Malaysia, Maldives, Mauritius, Mongolia, Myanmar, Nepal,

Oman, Pakistan, Philippines, Saint Lucia, South Africa, Sri Lanka, Tajikistan, Thailand, Tonga, Trinidad

and Tobago, Turkmenistan, United Arab Emirates, Uzbekistan, Vanuatu, Venezuela, and Yemen. These 38

countries are used as sample group countries in the present paper.