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Can Africa compete with China in manufacturing? The role of relative unit labour costs
Author(s) -
Golub Stephen S.,
Ceglowski Janet,
Mbaye Ahmadou Aly,
Prasad Varun
Publication year - 2018
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12603
Subject(s) - china , economics , unit (ring theory) , productivity , manufacturing sector , principal (computer security) , sample (material) , international economics , international trade , economic growth , geography , chemistry , mathematics education , mathematics , archaeology , chromatography , computer science , operating system
This paper examines sub‐Saharan Africa's ( SSA ) bilateral trade and cost competitiveness with China. We document an extraordinary imbalance in the structure of bilateral trade in that China overwhelmingly exports manufactured products to SSA and almost exclusively imports primary products in return. Our principal means of assessing the competitiveness of SSA 's manufacturing sector vis‐à‐vis China are measures of relative unit labour costs ( RULC ). We find that African RULC s declined over the 2000s as China's wages rose faster than Chinese productivity while the reverse was true for the SSA countries in our sample. Nevertheless, RULC s vis‐à‐vis China remain very high for many SSA countries. High RULC s along with weaknesses in the business climate suggest that most SSA countries are unlikely to be competitive in labour‐intensive manufacturing any time soon.