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The ‘China Shock’ and middle-income economies: threats to industrialization and human capital formation

Author

Listed:
  • Coxhead,Ian
  • Strutt,Anna
  • Corong,Erwin
  • Kitayaporn,Varan

Abstract

Aided by an unprecedented increase in tertiary-educated workers and industrial policies, China has become a major exporter of medium-high skill-intensity manufactures. Consequently, global prices of many such goods have fallen, creating potential cross-border spillovers. Using a general equilibrium model of world economy and trade, we simulate effects in other middle-income industrializers, with particular focus on labor market adjustments. We find that skill-intensive sectors contract in almost every country. Low-skill wages rise and skill premia decline. Spillovers from China’s expansion diminish prospects for industrial upgrading elsewhere, and in the longer run may impede accumulation of human capital for more knowledge-intensive growth.

Suggested Citation

  • Coxhead,Ian & Strutt,Anna & Corong,Erwin & Kitayaporn,Varan, 2026. "The ‘China Shock’ and middle-income economies: threats to industrialization and human capital formation," IDE Discussion Papers 1008, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper1008
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    Keywords

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    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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