Exports, FDI and Employment Growth in China

Abstract

This chapter analyses the impact of exports on employment growth in China. In an overpopulated, large agricultural economy such as China, there can be two interpretations of the relationship between labour, exports and growth. One is the ‘vent-for-surplus’ thesis, which suggests that the opening up of the economy to international trade provides an outlet for surplus productive capacity of the country, and promotes economic growth. The other is the ‘development with unlimited supplies of labour’ model, which suggests that capital accumulation in the industrial sector cumulatively draws surplus labour from the agricultural sector, and leads to output expansion in the economy. There are subtle differences between the two models and each of them has differing implications for policy. This chapter analyses the two models in the context of China’s exports and draws policy conclusions.