Competitiveness of China's Manufacturing Industry and its Impacts on the Neighbouring Countries

This paper investigates the rapid growth of China's share in the international commodity market and the structural changes of China's commodity exports. It demonstrates a significant improvement of international competitiveness in China's manufacturing sector. The panel data analysis, based on a Solow-Swan type growth model on China's 37 manufacturing industries from 1991 to 2002, reveals that the main sources of the strengthened competitiveness of China's manufacturing sector have been mainly from Total Factor Productivity (TFP), while labour productivity has been increasing and capital productivity has been falling. A preliminary empirical analysis on the impacts of China's increasing competitiveness finds that there are negative correlations between China and most of its neighbouring countries, both newly industrialised economies and other Southeast Asian developing economies. However, there is no evidence of negative impacts of China's increasing competitiveness on developed countries such as the United States and Japan.