PUBLICATIONS & REPORTS

Contents Introduction

This paper discusses the basic trends in employment, output, and labor productivity during China’s period of heavy industrial restructuring between 1995 and 2002. The analysis is based on a set of approximately 51,000 of China’s largest industrial enterprises covering the mining, manufacturing and utility sectors. China’s market reforms have been ongoing for a period of twenty-five years. As part of this process, China has undergone massive restructuring of its industrial enterprises and granted market access to foreign and private domestic firms. This has led to enormous gains in productivity and has made China a top exporter of goods to the developed world. With the formal sanctioning of private enterprise in 1999, WTO entry in 2001, and a constitutional guarantee of private property in 2004, China has reached a new level of openness and integration into the world economy. Concurrent with China’s emergence in the global economy, the developed nations have seen a sharp reduction in manufacturing employment. In developed countries at the technological frontier, the loss of jobs in manufacturing generally can be traced to improvements in production technologies that make it possible to generate more output with fewer resources. Reinforcing this trend, lower communications and transportation costs coupled with more open markets in countries like China have made it easier to outsource portions of their value chains. While there has been much discussion about offshoring high-wage jobs from the U.S. to low-wage countries like China, the loss of large numbers of manufacturing jobs is occurring in the U.S. and China simultaneously. Moreover, China is losing jobs in many of the same industries where the developed world has seen the greatest employment declines. Globally, workers are shifting into the service sector – and the new jobs are often higher value added, and higher paying than the manufacturing jobs they replace.