Fear of China: Is There a Future for Manufacturing in Latin America?

China's emergence has raised pointed questions about the future of manufacturing in Latin America. Once saw as its economic future, the viability of this activity in the region has long been challenged by traditional trade theory and, in practical terms, by at least three generations of Asian Tigers. China and its "unlimited supply of labor", rapid productivity growth, scale, and extremely interventionist state has brought the practical challenge to unprecedented levels. This paper, using mainly descriptive production and trade statistics, looks at the nature of this challenge and its implications. It begins by dealing with a central issue: Does manufacturing still matter for Latin America's development? It then moves on to examine the scope and nature of the Chinese challenge. It shows that endowments, productivity, scale and the government role, all work together to make China a formidable competitor. The paper concludes by discussing, in general terms, the (difficult) policy options available. This presentation presented at Latin America/Caribbean and Asia/Pacific Economics and Business Association (LAEBA)'s 1st Annual Meeting held in Beijing, China on December 3rd-4th, 2004.