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Does China Still Have a Labor Cost Advantage?


  • Janet Ceglowski
  • Stephen Golub


In recent years wages in China have been rising and the yuan has appreciated, potentially eroding China’s cost advantage in manufactures. This paper explores the evolution of China’s relative unit labor costs in manufacturing over 1998-2009. Between 1998 and 2003 China’s unit labor costs fell, but since 2003 they have increased both absolutely and relative to US unit labor costs. Much of the rise in China’s relative unit labor costs can be traced to a real appreciation of the yuan against the dollar. Despite the recent rise, China’s unit labor costs remain low relative to those in most other countries.

Suggested Citation

  • Janet Ceglowski & Stephen Golub, 2011. "Does China Still Have a Labor Cost Advantage?," CESifo Working Paper Series 3579, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_3579

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    References listed on IDEAS

    1. DennisTao Yang & VivianWeijia Chen & Ryan Monarch, 2010. "Rising Wages: Has China Lost Its Global Labor Advantage?," Pacific Economic Review, Wiley Blackwell, vol. 15(4), pages 482-504, October.
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    4. Bart van Ark & Abdul Azeez Erumban & Vivian Chen & Utsav Kumar, 2009. "the Cost Competitiveness of the Manufacturing Sector in China and India: An Industry and Regional Perspective," Economics Program Working Papers 09-02, The Conference Board, Economics Program.
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    6. Immaculada Martínez-Zarzoso & Felicitas Nowak-Lehmann D. & Sebastian Vollmer, 2007. "Competitiveness – A Comparison of China and Mexico," CESifo Working Paper Series 2111, CESifo Group Munich.
    7. Susan Ariel Aaronson, 2010. "How China's Employment Problems Became Trade Problems: China, Labour Law, and the Rule of Law," Working Papers 2010-11, The George Washington University, Institute for International Economic Policy.
    8. Adam Szirmai & Ruoen Ren & Manyin Bai, 2005. "Chinese Manufacturing Performance in Comparative Perspective, 1980-2002," Working Papers 920, Economic Growth Center, Yale University.
    9. Rawski, Thomas G. & Xiao, Wei, 2001. "Roundtable on Chinese Economic Statistics Introduction," China Economic Review, Elsevier, vol. 12(4), pages 298-302.
    10. Tatom John A, 2007. "The US-China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," Global Economy Journal, De Gruyter, vol. 7(3), pages 1-15, October.
    11. Aaronson Susan, 2010. "How China's Employment Problems Became Trade Problems," Global Economy Journal, De Gruyter, vol. 10(3), pages 1-32, October.
    12. Stephen S. Golub & Ronald W. Jones & Henryk Kierzkowski, 2007. "Globalization and Country-Specific Service Links," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 10(2), pages 63-88.
    13. van Ark, Bart, 1998. "Productivity," Journal of the Japanese and International Economies, Elsevier, vol. 12(2), pages 171-174, June.
    14. Nanno Mulder & Sylvie Montout & Luis Peres, 2002. "Brazil and Mexico's Manufacturing Performance in International Perspective, 1970-1999," Working Papers 2002-05, CEPII research center.
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    Cited by:

    1. Campbell, Douglas L., 2016. "Measurement matters: Productivity-adjusted weighted average relative price indices," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 45-81.
    2. Ari Van Assche & Jo Van Biesebroeck, 2017. "Functional upgrading in China’s export processing sector," Working Papers Department of Economics 590692, KU Leuven, Faculty of Economics and Business, Department of Economics.
    3. Douglas L. Campbell, 2014. "Through the Looking Glass: A WARPed View of Real Exchange Rate History," Working Papers w0210, Center for Economic and Financial Research (CEFIR).
    4. Carsten A Holz & Aaron Mehrotra, 2013. "Wage and price dynamics in a large emerging economy: The case of China," BIS Working Papers 409, Bank for International Settlements.
    5. Keiko Ito & Junko Shimizu, 2015. "Industry-Level Competitiveness, Productivity and Effective Exchange Rates in East Asia," Asian Economic Journal, East Asian Economic Association, vol. 29(2), pages 181-214, June.
    6. Stephen Golub & Aly Mbaye & Hanyu Chwe, 2015. "Labor Market Regulations in Sub-Saharan Africa, With a Focus on Senegal," Working Papers 201505, University of Cape Town, Development Policy Research Unit.
    7. repec:gam:jecomi:v:5:y:2017:i:4:p:45-:d:119541 is not listed on IDEAS
    8. Broich, T. & Szirmai, A., 2014. "China's economic embrace of Africa: An international comparative perspective," MERIT Working Papers 049, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    9. Michal Mlody, 2016. "Reshoring Trend and CEE: An Assessment of Possible Scenarios on the Example of Poland," Management, University of Primorska, Faculty of Management Koper, vol. 11(1), pages 29-50.
    10. Hideyuki Mizobuchi, 2015. "Measuring the comprehensive wage effect of changes in unit labor cost," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-12, December.

    More about this item


    China; labor costs; productivity; international competitiveness; real exchange rate;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General


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