Revisiting the revisited terms of trade: will China make a difference?

Kaplinsky, Raphael (2006). Revisiting the revisited terms of trade: will China make a difference? World Development, 34(6) pp. 981–995.

DOI: https://doi.org/10.1016/j.worlddev.2005.11.011

Abstract

In challenging the conventional wisdom at the time, Singer and Prebisch posited a number of explanations for declining terms of trade of developing economies, including both country- and product-specific factors. Over the past decade, we have begun to witness a simultaneous process of price differentiation within commodities (with the prices of some commodities increasing) and within manufacturing (with the price of many manufactures falling). These price changes may reverse the decline in the terms of trade of commodity producers. The entry of China into the global market has played an important role in this, augmenting the demand for many “hard commodities.” Its role as an exporter of manufactures, coupled with concentration in global buying may undermine the prices of many manufactures.

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