The Effect of Processing Trade on Employment: in Case of China

In this paper, we use panel data from 2002 to 2008 on China’s 31 provinces to analyze the effect of processing trade on regional employment. The results give evidence that processing trade has a significant and positive skill-bias effect on regional employment. Hereinto, processing import, including PIM and PSM import, especially the capital goods import by processing trade, is the root of the skill-bias effect of processing trade on employment. Net processing export is a driving to expand employment, including the skilled and the unskilled. But only PIM contributes to it.