Study On Comparative Advantage Of Labor-intensive Industries In China

China is one of the world most populous countries in the world with apopulation of1.3billion. As a populous country it has abundant labor resources. Butin recent years it has been noticed that there is a “labor shortage” phenomenonappeared in the coastal areas labor market in China. Along with this, the agingpopulation is also intensifying and the cost of labor and raw materials are rising inChina over time. With the influence of these phenomena, there is a frequentfluctuation in the exchange rate of currency and by the way, achieving thecomparative advantage of labor intensive industries has fell into a challenge. To knowmore about this, we must have a thorough understanding on the current laborintensive market and the comparative advantages of the labor intensive industry.In this paper, based on the theory of comparative advantage, the author hasadopted two indexes:1. revealed systematic comparative advantage index and2.trade competitiveness index.There is an empirical research has been done on theinfluencing factors of the comparatives advantages of labor industries of China. Thetime periods of data series have been taken in research is since1995-2011. Doingresearch, the study adopts partial least squares and simca-p software. The researchstudy focused on the real effective exchange rate of RMB, the average wage rate oflabor, foreign direct investment (FDI), the cost of education and human capital andthe effectiveness of the comparative advantages of the labor intensive industry inChina. Based on the comprehensive study, the author has made some policysuggestions in terms of comparative advantages of labor intensive industries in China.The study shows that most labor intensive products have a comparativeadvantage and having strong comparative advantage of labor intensive productsachieve more than half, but weakening trends are also appeared. comparativeadvantages of SITC8is better than SITC6. The empirical results of the study find thatthe real effective exchange rates, foreign direct investment (FDI) are positivelycorrelated with the comparative advantages of labor intensive industries in China. Butthe average wage rate and the cost of education and human capital are negatively correlated with the comparative advantages of labor intensive industries. The authorhas put eight policy suggestions in this paper:1.create flexibility to the structure ofexport commodity,2. Develop restriction safety footwear alternative substances,3.Transfer to the Midwest and Africa region,4. develop the labor intensive industries,5.Improve the wages of labor moderately,6. Emphasis on human capital and improvethe quality of labors through giving priority to their education,7. Avoid the risk ofexchange rate,8. Use foreign capital high quality.