What Is the Impact of Chinese Import Penetration on the South African Manufacturing Sector?

Abstract

What is the impact of Chinese import penetration on the South African manufacturing sector? Are there import penetration regime effects that convey important information to policy makers? Evidence in this chapter shows that the estimates of the Chinese import penetration thresholds of 6 per cent and 2.48 per cent can be used as import guides to manage the impact of the Chinese import competition on the domestic manufacturing sector. We find that the Chinese import penetration regimes matter for the South African manufacturing sector. High import penetration regimes result in the decline in the domestic manufacturing output growth, employment growth and labour productivity growth. This contrasts with the effects of low Chinese manufacturing sector regimes. The domestic manufacturing sector output growth, employment growth and labour productivity growth increase due to a low Chinese import penetration regime shock. Furthermore, the low Chinese import penetration regime shock amplifies the effects of positive labour productivity shocks on the manufacturing sector output growth, employment growth and labour absorption. Thus, the low Chinese import penetration regime is important for the transmission and amplification of positive labour productivity shocks on the manufacturing sector. The policy implication of these results is that the estimated Chinese import penetration ratios can be used as a guide to manage the impact of the Chinese import competition on the domestic manufacturing sector.