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The location substitution effect: does it apply for China?

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  • Banik, Nilanjan
  • Das, Khanindra Ch.

Abstract

The notion about China being factory of the world is changing. Factories in China are shifting their production base to neighboring Asia, primarily because of higher input costs in China, a volatile Chinese exchange rate, Chinese exports being increasingly targeted by its major trading partners, and a fall in price-competitiveness in producing in mainland China. We examine the location substitution effect for China: Chinese firms are exporting primary, intermediate and machinery items, meant for producing final output elsewhere. Results suggest Chinese firms are increasingly substituting their production base outside China.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38659.

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Date of creation: 17 Apr 2012
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Handle: RePEc:pra:mprapa:38659

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Keywords: Trade; Foreign Direct Investment; China; GMS;

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