The Cost Competitiveness of Manufacturing in China and India

Bart van Ark, Abdul Azeez Erumban, Vivian Chen and Utsav Kumar

in Emerging Giants

Published in print April 2010 | ISBN: 9780199575077
Published online September 2010 | e-ISBN: 9780191722141 | DOI:
The Cost Competitiveness of Manufacturing in China and India

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This chapter focuses on comparisons of productivity, (unit) labor cost, and industry-level competitiveness for Chinese and Indian manufacturing. It finds that China has increased its labor productivity to a level above that of India, but due to a somewhat higher compensation level, China is still somewhat at a disadvantage in terms of unit labor cost in manufacturing. It finds rapid declines in unit labor cost across industries and provinces in China, but increases in many instances in India. This suggests that productivity and compensation growth have become much more aligned across regions in China whereas this is not (yet) the case in India. It relates these results to differences in the implementation of market reforms between the two countries and removal of barriers to resource mobility eradicating inefficient manufacturing activity.

Keywords: cost competitiveness; manufacturing; India; China; labor productivity

Chapter.  12631 words.  Illustrated.

Subjects: Economic Development and Growth

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