The China syndrome: A cross‐country evidence

Abstract

While in many advanced countries the increasing import competition from China on employment is a major concern for policymakers and the general public, its impact of Chinese import competition could be different across countries, depending upon the volume and the composition of the products. This paper examines the impact of the China shock on employment in six advanced countries. We find that the import penetration of final goods from China has negative effects on manufacturing employment in these countries, whereas the import penetration of intermediate inputs from and the exports to China could have positive effects. Moreover, such positive effects could offset or even outweigh the negative effects in some countries. These results together suggest that a careful interpretation is needed when evaluating the external validity of the China shock that is obtained in one country.

China's impact on regional employment: Propagation through input–output linkages and co‐location patterns

“…The net effect on local CZ‐level employment from these two opposite effects is likely to be a net negative, which is in agreement with the establishment‐ and product‐level analyses by Hayakawa et al (2021), indicating that the direct and indirect propagated effects work even at the local labour‐market level. Moreover, our results complement those in the literature that find that intermediate imports from China may be favourable to the importing manufacturers (Kiyota et al, 2021; Taniguchi, 2019) by explicitly showing the positive downstream supply chain shock propagation. Further, our results provide additional evidence that intermediate imports are possibly a key factor distinguishing Japan from other countries, as we find that the trade structure between Japan and China may drive the difference between our results and the US case (Acemoglu, Autor, et al, 2016; Wang et al, 2018) in which positive downstream effect is observed primarily in non‐manufacturing sectors.…”

“…34 Although our estimates of the composite employment consequences do not coincide with Taniguchi (2019), the implication from our downstream channel findings benefits from that study which shows that the positive employment effect of Chinese import penetration at the prefecture level comes from the imports of intermediate goods. It is further shown by Kiyota et al (2021) that this pattern is more widely applicable amongst developed countries. Our findings and those of Taniguchi (2019) together thus suggest that Japan-China trade, which involves larger intermediate inputs used in subsequent production, may work favourably for Japanese downstream manufacturing industries.…”

“…The differential effects of increased imports from China, depending on whether they are final or intermediate goods, are also documented by an industry level analysis for multiple countries (Kiyota et al, 2021).…”

Trade and Inequality in Europe and the Us

“…While some firms will benefit from access to cheaper foreign inputs, others may face disruptions when their domestic suppliers succumb to import competition. Drawing on coarser data from the World Input-Output Database, Kiyota, Maruyama and Taniguchi (2021) show that supplier exposure to Chinese import competition from 2000 to 2014 caused only modest employment changes not only in US industries, but also in their counterparts in the UK and France. Instead, job gains in Germany were significant.…”

“…Kiyota, Maruyama and Taniguchi (2021) estimate that the growth of imports of intermediate goods from China was 24% of the growth in total imports in the UK, 27% in the US, 31% in Germany and 36% in France, while more than two-thirds of South Korea's imports from China were intermediate rather than final goods.25 Adao, Arkolakis and Esposito (2020) observe that US local labour markets experienced differential declines in employment and wages when not only these regions themselves, but also their geographic neighbours, faced a large direct exposure to Chinese import competition. These geographic spillovers may partly reflect adverse demand spillovers along supply chains, where the contraction of industries in neighbouring regions reduces the demand for intermediate inputs produced by the supplier industries located in a region.…”