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Cost Competitiveness Comparisons and Convergence in China

Author

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  • Lili Kang
  • Peng Fei

Abstract

We investigate trends in regional cost competitiveness in China's four regions (Coastal, Northeast, Interior and West) over the past thirty-five years. We find that the Coastal region lost its initial cost competitiveness as its higher relative labour productivity (RLP) was offset by rapidly rising relative nominal labour costs (RNLC) due to rising wages. The Northeastern region still has cost advantages in the traditional Manufacturing sector. The Interior and West regions improved their competitiveness in most industries due to low RNLCs. There is convergence of relative unit labour cost (RULC) in all industries before 1995, but only in Finance after 1995. However there is convergence in RLP in five industries in 1978–95 and 1995–2009, offering prospects for robust growth for China into the future.

Suggested Citation

  • Lili Kang & Peng Fei, 2013. "Cost Competitiveness Comparisons and Convergence in China," National Institute Economic Review, National Institute of Economic and Social Research, vol. 223(1), pages 49-60, February.
  • Handle: RePEc:sae:niesru:v:223:y:2013:i:1:p:r49-r60
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    References listed on IDEAS

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    1. Fleisher, Belton & Li, Haizheng & Zhao, Min Qiang, 2010. "Human capital, economic growth, and regional inequality in China," Journal of Development Economics, Elsevier, vol. 92(2), pages 215-231, July.
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    3. Appleton, Simon & Knight, John & Song, Lina & Xia, Qingjie, 2002. "Labor retrenchment in China: Determinants and consequences," China Economic Review, Elsevier, vol. 13(2-3), pages 252-275.
    4. Adam Szirmai & Ruoen Ren & Manyin Bai, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Working Papers 920, Economic Growth Center, Yale University.
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    6. Vivian W. Chen & Harry X. Wu & Bart van Ark, 2009. "More Costly Or More Productive? Measuring Changes In Competitiveness In Manufacturing Across Regions In China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(s1), pages 514-537, July.
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    Cited by:

    1. Françoise Lemoine & Grégoire Mayo & Sandra Poncet & Deniz Ünal, 2014. "The Geographic Pattern of China's Growth and Convergence within Industry," Working Papers 2014-04, CEPII research center.

    More about this item

    Keywords

    Unit labour cost; regional development planning; China;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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