Can Africa compete with China in manufacturing?
The role of relative unit labour costs
Stephen S. Golub
Ahmadou Aly Mbaye
Swarthmore College, Swarthmore, PA, USA
Bryn Mawr College, Bryn Mawr, PA, USA
e Cheikh Anta Diop, Dakar, Senegal
Economic ties between China and Africa have intensified in recent years, with bilateral trade growing
considerably faster than total trade for both parties. The effects of China’s rising involvement in Afri-
can economies are controversial (Asongu & Aminkeng, 2013; Brautigam, 2009; De Grauwe, Houssa,
& Piccillo, 2012; Eisenman, 2012; Pigato & Tang, 2015; Tull, 2006). On the positive side, China’s
demand for African raw materials and its investments in African infrastructure contributed to Africa’s
improved economic growth in the 2000s. On the other hand, trade with China does little to promote
and may even inhibit African structural transformation as booming exports of primary products exac-
erbate Africa’s dependence on capital-intensive minerals and fuels while China’s exports of labour-
intensive manufactures create strong headwinds for Africa’s meagre industrial base and formal
employment. Still, manufacturing wages in China have been rising quickly in recent years, potentially
creating new opportunities for low-cost producers. This paper examines whether African countries
can develop labour-intensive manufacturing exports, taking advantage of rising wages in China.
Our principal means of assessing the competitiveness of sub-Saharan Africa’s (SSA) manufac-
turing sector are measures of relative unit labour costs (RULC). We compare unit labour costs
(ULCs) in SSA manufacturing to those in China. We also assess African competitiveness vis-
India and other developing countries.
To our knowledge, our estimates are the first to evaluate SSA’s manufacturing competitive-
ness with respect to China by comparing their ULCs. A number of previous contributions have
examined manufacturing competitiveness in China and Africa, but few have made direct
comparisons between Africa and China. Cox and Koo (2003) report comparative wage and
productivity data for China vis-
a-vis the United States and Mexico for 2001 but stop short of
ULC comparisons. Szirmai, Ren, and Bai (2005) provide a careful analysis of relative Chinese
labour productivity over time, but do not cover relative wages and ULCs. Banister (2004) is a
detailed study of labour costs in Chinese manufacturing that includes a meticulously
constructed estimate for 2002 but does not contain productivity or unit labour cost estimates.
© 2017 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/twec World Econ. 2018;41:1508–1528.