PurposeThe purpose of this study is to investigate the impact of Chinese import penetration on industrial production and inflation in low income countries, specifically, the impact on textile, wood and furniture, paper and chemical in Zimbabwean industries.Design/methodology/approachThe study adopted bounds test of co-integration advocated by Pesaran et al. (2001) to distinguish between short- and long-run impacts. A sector-specific regression models were specified for textile, wood and furniture, paper and chemical industries and the other one on inflationFindingsThe effect of Chinese imports varies across industry. A negative impact on wood and furniture and paper industries is confirmed and rejects an anticipated negative effect on textile industries. However, import penetration had a negative effect on inflation.Practical implicationsThe study recommends that the country should consider the trade-off between industrial shrinkage and low prices when formulating trade policy, especially import restrictions, as trade protectionism has failed in most African countries. Temporary trade restriction measures should be implemented and this will encourage dynamic efficiency in domestic industries.Originality/valueThe study identified the need for sector-specific impact of Chinese import penetration on manufacturing sector and the dynamics on inflation.
Journal of Chinese Economic and Foreign Trade Studies – Emerald Publishing
Published: Dec 31, 2017
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