Research On Chinese Comparative Advantage In Labor Costs

According to Hector and Russian Lin theory, a country engaged in international trade production, to use capital comparative intensive technology or use labor intensive technology, is decided by the relative price of capital and labor. Generally speaking for a newly begin to enter the late-development countries for economic development, usually scarcity is capital and the relative rich is labor. Therefore all countries wage level difference became international economic comparative advantage of important decision factors.Recently, rising labor costs in China, especially in the end of 2003, "Labor Shortage" phenomenon causes people to worry about Chinese labor cost advantage. The idea that Chinese labor cost advantage started to lose, or even that our country is approaching the "Lewis turning point", labor is not unlimited supply of labor. But Chinese labor costs'rising driven by both internal and external force, rising factors are complicated. This paper argues that cannot conclude that the comparative advantage of Chinese labor cost has been lost.Based on the current situation of our country's labor costs in recent years, it is concluded that the general labor cost is rising. In order to analyze the situation of our country's labor costs changing, the paper analyzes both from the economy as a whole and especially from China manufacturing industry, and additional analysis of the labor productivity and unit labor cost changes. Because of our country's labor-intensive industries labor costs advantages are obvious, and this industry's main competition in the international competition is low cost, this industry in the international of the main competitive advantage is the low cost advantage, so the exports of labor-intensive industries were analyzed. The paper obtained that in the post-crisis era, Chinese exports of labor-intensive products do have a decreasing trend.Then use the Granger causality test method examined the Granger reasons of the rise in labor costs in China between FDI inflows and exports. To analyze the Granger reasons of the exports further, the paper researches in labor-intensive products exports, capital-intensive exports, resource-intensive exports. Article concludes between the labor cost rises and FDI inflows, there exists one-way granger causality; and between the labor cost rises and the exports of labor-intensive products, there exists a two-way granger causality; and the Granger causality between labor costs and capital intensive, resource-intensive products export are not obvious. This is also further proof that the exports of labor-intensive products is relying on labor costs comparative advantage.Finally, the article pointed out that although Chinese labor costs continue to rise up but the comparative advantage of Chinese labor costs are still here, China has not been to the "Lewis turning point". At last, the paper puts forward suggestions on the current labor costs rising.