CHINESE COMPETITION AND THE
RESTRUCTURING OF SOUTH
AFRICAN MANUFACTURING
Rhys Jenkins (UEA)
Lawrence Edwards (UCT)
GROWTH OF CHINA
• GDP growth of >9% p.a. for three decades
• Overtakes Japan as 2nd largest economy in the
world
• Share of world trade increased from 1% to 8%
(1980-2009)
• Overtakes Germany as world’s largest exporter
ANALYTICAL FRAMEWORK
COMPETITIVE
DIRECT
INDIRECT
Chinese imports
displacing domestic
producers
Loss of market share
to China in export
markets
COMPLEMENTARY
Exports to China
Imports of parts from
China
Involvement in Global
Production Networks
with China
Increased imports from China
Falling domestic prices
Import competing
industries
Import using
industries
Falling profit
margins
Rising profit
margins
Exit of least
efficient firms
Falling
production
Defensive innovation
by survivors
Productivity
changes
Falling
Employment
Wages
Increased
production
Increased
employment
Increased
wages
TWO KEY QUESTIONS
• What types of products are being imported
from China?
• Consumer goods
• Intermediate goods
• Capital goods
• Are Chinese imports displacing imports from
other countries or domestic production?
WHICH INDUSTRIES ARE AFFECTED BY
CHINESE COMPETITION?
• By technology level – Lall classification
•
•
•
•
•
Primary products
Resource-based manufactures
Low technology manufactures
Medium technology manufactures
High technology manufactures
CHINESE IMPORT PENETRATION
• Estimation of China’s share in apparent
consumption by industry
• Converting trade data to industrial classification
• Level of disaggregation (3 digit ISIC)
• Data problems – unregistered trade
METHODOLOGY FOR ANALYSING
IMPACTS OF IMPORTS FROM CHINA
• Chenery-type decomposition to estimate
impacts on output and employment.
• Discrete time periods
• Estimate extent to which China displaces other imports
and/or domestic production
• Use of employment coefficients to estimate
employment effects
• Panel data estimation
• Structural model (fixed effects)
• Dynamic model (GMM)
METHODOLOGY FOR ANALYSING IMPACTS
OF CHINESE COMPETITION ON EXPORTS
TO THIRD MARKETS
• Constant Market Share Analysis (Shift/Share)
∆kH = ΣXtHi*∆mi + ΣMit+1*∆kHi
(1)
where: kH is the share of country H in total imports of the destination
market
XH is the total exports of country H to the destination market
mi is the share of product i in the total imports of the destination market
Mi is the total imports of product i by the destination market
Superscripts t and t+1 represent the initial and final year of the period.
• Extension by Batista to distribute changes in market shares
between competitors.
BATISTA METHOD
• The loss of market share by a country (H) to
China (C), in a particular product i is defined
as:
∆kHCi = ∆kHi*ktCi - ∆ kCi* ktHi
(2)
Summing over all products gives the aggregate loss
of market share to China:
Σ∆kHCi = Σ∆kHi*ktCi - Σ∆ kCi* ktHi
(3)
BRAZILIAN TRADE IN MANUFACTURES
WITH CHINA, 1996-2010 (US$bn.)
CHINA’S SHARE IN BRAZIL’S TOTAL IMPORTS AND
EXPORTS OF MANUFACTURES, 1996-2010 (%)
BRAZILIAN IMPORTS FROM CHINA BY
END USE (%)
1996
2001
2006
2009
Food & beverages
3.3
0.9
0.7
1.0
Industrial supplies
22.3
26.2
23.6
26.5
Fuels & lubricants
3.6
9.2
1.7
0.6
Capital goods
12.3
18.1
26.2
24.9
Parts for capital goods
11.9
23.4
28.3
25.3
Transport equipment
0.3
0.0
0.1
0.8
Parts for transport
equipment
Consumption goods
2.6
2.2
4.6
4.4
43.6
19.8
14.8
16.5
BRAZILIAN IMPORTS FROM CHINA BY
TYPE OF PRODUCT (%)
1996
Primary Commodities
2001
2006
2009
3.4%
4.3%
1.4%
1.6%
Resource Based Manufactures
10.9%
17.0%
9.5%
10.7%
Low Technology
39.6%
20.6%
16.1%
20.8%
Medium Technology
20.2%
19.2%
26.2%
25.2%
High Technology
25.0%
38.4%
46.5%
41.4%
IMPORTS AS A SHARE OF DOMESTIC
DEMAND IN MANUFACTURING, 1996-2007
CHINESE IMPORTS SHARE OF
DOMESTIC CONSUMPTION (%)
Industry
Share 2007
Office equipment
62.9
Optical and photographic equipment
31.2
Travel and other leather goods
18.3
Batteries and accumulators
17.8
Lamps and lighting equipment
15.5
Radio & TV receivers and sound and video recorders
14.6
Miscellaneous manufactures
12.8
Electronic data processing equipment
12.8
Basic electronic materials
12.7
Telephone and radio & TV transmitting equipment
12.5
DISPLACEMENT OF OTHER IMPORTS AND DOMESTIC
PRODUCTION BY CHINESE IMPORTS (1996-2007)
1996-2001
2001-2004
2004-2007
Total gain by China (Reais mn.)
787
3,718
9,016
Gain by China from ROW (Reais mn.)
197
2,225
5,099
Gain by China from domestic
producers (Reais mn.)
590
1,493
3,917
% from RoW
25.0%
59.8%
56.6%
% from domestic producers
75.0%
40.2%
43.4%
OVERALL IMPACT OF CHINESE IMPORTS ON
INDUSTRIAL EMPLOYMENT (1996-2007)
1996-2001 2001-2004 2004-2007
Loss of employment to
Chinese imports
Gain from exports to
China
Growth in total
industrial employment
-6,312
-9,168
-32,726
8,121
12,813
-4,870
320,111
867,210
767,703
PANEL DATA RESULTS
Fixed effects
All industries
Prices
Profits
Productivity
-ve***
+ve***
Employment -ve**
Wages
-ve***
L-intensive
(additional)
GMM (Arellano-Bond)
All industries
L-intensive
industries only
-ve***
-ve***
0
+ve*
-ve*
0
-ve*
0
-ve***
+ve**
-ve***
-ve**
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
Share in Industrial Imports
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
MEXICO
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
19
96
ARGENTINA
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
19
96
Share of Industrial Imports
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Share of Industrial Imports
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
19
96
Share of Industrial Imports
SHARE OF INDUSTRIAL IMPORTS FROM BRAZIL AND
CHINA, 1996-2009
CHILE
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
VENEZUELA
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Brazil
China
DISPLACEMENT OF BRAZILIAN MANUFACTURED
EXPORTS BY CHINA, 1996-2009
Share of Brazilian exports
1996-2001
USA
2001-2004
2004-2009
-0.7%
-9.6%
-5.3%
-2.5%
-0.3%
-5.9%
0.1%
-0.3%
-6.8%
Chile
-1.2%
-1.0%
-14.4%
Mexico
-0.4%
-1.2%
-6.6%
Venezuela
-0.8%
0.2%
-8.6%
EU
Argentina
CHINESE TRADE FLOWS WITH
SOUTH AFRICA: A CURSORY
OVERVIEW
CHINA’S RISING DOMINANCE AS
SOURCE OF SA IMPORTS
South Africa's Top import partners by trade value
1995
2000
2005
2009
Country
Share Country
Share Country
Share Country
1 Germany
17.93 Germany
15.26 Germany
16.24 China (1)
2 USA
12.77 USA
13.52 China (2)
10.42 Germany
3 UK
11.61 UK
9.68 USA
8.99 USA
4 Japan
11.05 Japan
9.24 Japan
7.77 Japan
5 Italy
4.28 France
4.90 UK
6.23 UK
6 France
4.24 China (6)
4.31 France
5.07 France
7 Asia Othr.ns 3.50 Italy
3.80 Italy
3.33 Italy
8 Switz.Liecht 2.64 Switz.Liecht 2.82 Korea Rep. 3.04 Thailand
9 Netherlands 2.55 Australia
2.82 Brazil
2.73 India
10 Belgium-Lux 2.48 Asia Othr.ns 2.63 Australia
2.42 Brazil
11 China (11)
2.07 Netherlands 2.21 India
2.03 Korea Rep.
Share
16.40
14.50
9.43
6.06
4.69
3.83
3.12
2.67
2.62
2.42
2.20
… DRIVEN BY INCREASED IMPORTS OF
EXISTING PRODUCTS AND NEW PRODUCTS
… AND ACROSS NUMEROUS
INDUSTRIES
Country ranking of China as
source of imports
1995
2009
Meat, fish, fruit, vegetables, oils & fa
20
6
Dairy products
24
15
Beverages
50
26
Knitted and crocheted fabrics
6
1
Clothing
1
1
Footwear
1
1
Sawmilling and planing of wood
41
6
Paper and paper products
30
3
Coke oven and petroleum products
2
2
Basic chemicals
14
1
Non-metallic mineral products
8
1
Basic iron and steel
20
1
Other fabricated metal products
7
1
General purpose machinery
16
1
Household appliances
2
1
Television, radio and other electronic e
12
1
Motor vehicles
26
10
Other transport equipment
12
9
Furniture
8
1
Other manufacturing
1
1
Total Manufacturing
Share Chinese imports
in total SA imports (%)
1995
2009
1
5
0
1
0
0
5
62
29
71
36
73
0
5
0
7
16
24
1
12
5
22
1
25
4
30
1
23
14
62
2
32
0
1
1
3
2
42
15
48
2
18
… AT SUBSTANTIALLY LOWER PRICES
Import unit values of China relative to imports from other countries
(Chinese imports as weights)
0.70
0.60
0.50
0.40
0.30
0.20
0.10
Pchina/P Developing
Pchina/P Developed
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
0.00
COMPOSITION OF IMPORTS SHIFTING
TO HIGH-TECH
High-Technology
Medium-Technology
Low-Technology
Resource-Based
Primary products
Other
Total
Composition of SA
imports from China
1995
2009
12.94
27.29
22.20
27.92
44.65
32.18
8.27
9.23
11.44
2.76
0.50
0.63
100
100
Share China in
Total SA imports
1995
2009
1.33
20.76
1.06
12.37
8.44
39.77
1.18
11.06
3.15
6.77
0.30
1.32
2.07
16.39
TREND IN CHINESE IMPORTS AS SHARE
DOMESTIC DEMAND DIFFERS FROM BRAZIL
Import share of domestic consumption of manufactured goods
0.40
0.35
0.30
0.25
0.20
0.15
0.10
0.05
From China
Rest of world
From world
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
-
… WITH MUCH VARIATION AT THE
INDUSTRY LEVEL