Competing along domestic value chains: Chinese import penetration and the performances of manufacturing firms in South Africa

Sofia Torreggiani, SOAS, University of London

Using firm-level tax administrative data from 2010 to 2017, we study the impact of direct and indirect Chinese import penetration on the performances of manufacturing firms in South Africa, and whether firms investing intensively in capabilities development are more resilient to such competitive pressure. We first explore whether Chinese import exposure—both direct (e.g. affecting the sector in which the firm itself operates) and indirect (e.g. through input–output linkages along the domestic value chain)—have been associated with firms downsizing in terms of decreasing employment and sales growth and higher probability of exiting the market. Second, we examine whether firms undertaking substantial investments in process and product innovation and skills development perform better in response to import competition. Our results indicate that rising Chinese import exposure—not only direct, but also in downstream segments of the domestic value chain—leads to slower sales and employment growth for the entire sample of surviving firms and to higher probability of shutdown for firms not undertaking significant spending in capabilities development. However, we also find that the negative impact of Chinese import penetration is partially mitigated by substantial investments in capital, innovation, and skills development.

About the speaker

Sofia Torreggiani is a PhD Candidate in the Department of Economics at SOAS University of London and a Visiting Research Fellow at the South African Research Chair in Industrial Development of the University of Johannesburg. Her research focuses on South-South trade, Global Production Networks and industrial development, with special reference to the issues faced by emerging countries. Between 2018 and 2019, she has been Co-Principal Investigator for a research project within the "Southern Africa - Towards Inclusive Economic Development (SA-TIED)" UNU-WIDER program, conducting extensive analysis on import competition and manufacturing firms' performances. Prior to joining SOAS, she has worked as an Economist at the Trade and Markets Division of the United Nations Food and Agriculture Organization. 

Venue: 0.18

Date: 05 March 2020

Time: 12:00 - 13:00