Manufacturing Competitiveness in Times of China: Evidence from South Africa.

The opportunities and challenges associated with increasing South-South trade and global value chain (GVCs) integration have gained centre-stage in the academic and policy debate across developing countries. China looms large in these discussions, given the massive gains in its world manufacturing share since the mid-1990s, and the increasing domestic value-added content of its exports since the mid-2000s. The dramatic expansion in Chinese commercial weight, and the country's upgrading from global assembler to parts provider and system integrator along GVCs, even in some advanced manufacturing sectors, opens up important questions on its impact on the rest of the world. This is particularly the case for many countries trapped in their middle-income status, experiencing premature deindustrialisation and deteriorating trade imbalances.
Informed by a structural-evolutionary approach, this research tries to understand to what extent the current globalisation context, particularly the rise of China, shifts the goal posts for middle-income economies, heightening the challenges they face in their transition to high-income status. This broad research question is operationalised within the context of an underperforming middle-income country such as South Africa, where the increasing integration into the global economy after the end of the apartheid, and particularly the ongoing intensification of import competition from China, has gone hand-in-hand with severe unemployment, poor growth performances, deindustrialisation dynamics, serious challenges in upgrading the domestic economic structure.
The empirical section of the thesis consists of three independent chapters, each of which takes a distinct approach to explore the effects of the rise of China on the performances of South African manufacturers over the past two decades.
In the first empirical chapter, I analyse the impact of Chinese import penetration on firms' performances, taking into account the mediating role of technology and production capabilities of domestic companies. Specifically, using a unique firm-level database (2010-2017), I study the impact of Chinese import penetration - both direct and indirect (e.g. through input-output linkages along the domestic value chain) - on the performances of manufacturing firms, and whether firms investing relatively more intensively in capabilities' development are more resilient to such competitive pressure. This chapter employs AQMs (advanced econometrics combined with I-O analysis).
In the second empirical chapter, I investigate the extent to which increasing Chinese exports of medium- to high-tech manufacturing products have displaced or complemented South African ones in third importing markets. Using highly detailed Harmonized System product-level data from 2000 to 2018, I estimate an augmented gravity model equation on South African and Chinese medium- to high-tech exports to the most relevant importers of these South African goods.
To complement the exercises above, in the third empirical chapter, I empirically investigate the main reasons behind the ongoing marginalisation of South Africa as a strategic location for production and innovation of mining-related equipment, despite the strong technological capabilities of its domestic supplier base. By analysing the role of dominant multinational incumbent firms and powerful emerging Chinese actors in shaping the governance structures of the global mining machinery industry, the chapter highlights the non-technological nature of the barriers facing South African firms in their attempt to capture value from upgrading, and to consolidate their competitive position, moving from local to global. Primary data has been gathered through 49 interviews conducted with representatives from companies, industry associations and relevant institutions in South Africa, between January and June 2019.