China shock

The China shock (or China trade shock) is the impact of rising Chinese exports on manufacturing employment in the United States and Europe after China's accession to the World Trade Organization in 2001.[1][2] Studies have estimated that the China trade shock reduced U.S. manufacturing employment by 550,000 (explaining about 16% of the total decline in manufacturing employment in the U.S. between 2000 and 2007),[3] 1.8-2.0 million,[4] and 2.0-2.4 million.[5] Losses in manufacturing employment have also been observed in Norway,[6] Spain,[7] and Germany.[8] Studies have shown that there was "higher unemployment, lower labor force participation, and reduced wages in local labor markets" in U.S. regions that have industries that competed with Chinese industries.[9]

A 2023 review of existing economic research concluded that US-China trade since the early 2000s caused aggregate welfare gains in both countries; had winners and losers in the US; and was not a leading cause of manufacturing employment decline in the US.[10]

Experts have argued that the China trade shock in relation to consumer goods largely ended by 2006 or 2007[11] while indicating that for capital goods the effects of Chinese imports to the United States continued up until 2012 and are ongoing in specific product categories.[1]

  1. ^ a b Brad W. Setser. "When Did the China Shock End?". Council on Foreign Relations.
  2. ^ Lipton, Gabe (2018-08-14). "The Elusive 'Better Deal' With China". The Atlantic. Retrieved 2019-06-10.
  3. ^ Caliendo, Lorenzo; Dvorkin, Maximiliano; Parro, Fernando (2019). "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock". Econometrica. 87 (3): 741–835. doi:10.3982/ECTA13758. ISSN 1468-0262.
  4. ^ Feenstra, Robert C.; Sasahara, Akira (2018). "The 'China shock,' exports and U.S. employment: A global input–output analysis" (PDF). Review of International Economics. 26 (5): 1053–1083. doi:10.1111/roie.12370. ISSN 1467-9396. S2CID 168726505.
  5. ^ Acemoglu, Daron; Autor, David; Dorn, David; Hanson, Gordon H.; Price, Brendan (2015-12-21). "Import Competition and the Great US Employment Sag of the 2000s" (PDF). Journal of Labor Economics. 34 (S1): S141–S198. doi:10.1086/682384. hdl:1721.1/106156. ISSN 0734-306X. S2CID 14134863.
  6. ^ Balsvik, Ragnhild; Jensen, Sissel; Salvanes, Kjell G. (2015-07-01). "Made in China, sold in Norway: Local labor market effects of an import shock". Journal of Public Economics. The Nordic Model. 127: 137–144. doi:10.1016/j.jpubeco.2014.08.006. hdl:11250/196942. ISSN 0047-2727. S2CID 14918934.
  7. ^ Donoso, Vicente; Martín, Víctor; Minondo, Asier (2015-01-01). "Does Competition from China Raise the Probability of Becoming Unemployed? An Analysis Using Spanish Workers' Micro-Data". Social Indicators Research. 120 (2): 373–394. doi:10.1007/s11205-014-0597-7. ISSN 1573-0921. S2CID 55904167.
  8. ^ Dauth, Wolfgang; Findeisen, Sebastian; Suedekum, Jens (2014). "The Rise of the East and the Far East: German Labor Markets and Trade Integration". Journal of the European Economic Association. 12 (6): 1643–1675. doi:10.1111/jeea.12092. hdl:10419/88626. ISSN 1542-4774. S2CID 11039378.
  9. ^ Hanson, Gordon H.; Dorn, David; Autor, David H. (2013). "The China Syndrome: Local Labor Market Effects of Import Competition in the United States". American Economic Review. 103 (6): 2121–2168. doi:10.1257/aer.103.6.2121. hdl:1721.1/95952. ISSN 0002-8282.
  10. ^ Caliendo, Lorenzo; Parro, Fernando (2023). "Lessons from US–China Trade Relations". Annual Review of Economics. 15 (1): 513–547. doi:10.1146/annurev-economics-082222-082019. ISSN 1941-1383.
  11. ^ Brandt, Loren; Lim, Kevin (2024). "Opening up in the 21st century: A quantitative accounting of Chinese export growth". Journal of International Economics. 150: 103895. doi:10.1016/j.jinteco.2024.103895. ISSN 0022-1996.