The comparative advantage of Chinese manufactured exports
| DOI | https://doi.org/10.1108/17544401211233507 |
| Published date | 15 June 2012 |
| Pages | 107-126 |
| Date | 15 June 2012 |
| Author | Hao Wei,Zhao Chunming |
| Subject Matter | Economics |
The comparative advantage of
Chinese manufactured exports
Hao Wei
International Trade Department, Beijing Normal University,
Beijing, China and
Columbia University, New York, New York, USA, and
Zhao Chunming
School of Economics and Business Administration,
Beijing Normal University, Beijing, China
Abstract
Purpose – Considerable research has been conducted on the comparative advantage of Chinese
manufactured exports before 2000, but too little attention has been focused on the twenty-first century.
With this rapid growth of China’s export volume since 2001, what is the change in comparative
advantage? Have qualitative changes taken place? The purpose of this paper is to conduct a thorough
analysis of the comparative advantage of Chinese manufactures from 2002 to 2009, not only within the
world market but also in the US market.
Design/methodology/approach – The research is based on 144 manufactures’ comparative
advantage in the US and world market, displaying the distribution and variation range for the
comparative advantage of Chinese manufactures at different technological levels in the 2002-2009
period with the RCA Index. This paper classifies 144 kinds of manufactures (on Standard International
Trade Classification, Rev. 3 data) by technology level into five general groups and nine small groups,
which cover the majority of Chinese manufactured exports.
Findings – First, the authors found that types of Chinese manufactured products with comparative
advantage in both world and US markets are increasing. Most of the products with comparative
advantage are low technology (LT) products. Second, in the world market, the comparative advantage of
Chinese medium technology (MT) products has largely improved, but their RCA indexes are low and
their kinds of products with very high comparative advantage are small. Third, as a whole, Chinese
manufactured exports are of greater comparative advantage in the world market than in the US market.
Specifically, LT products have the same position in world and US markets, while MT products
and high technology (HT) products obviously have a greater comparative advantage in the world
market.
Originality/value – First, little research has been conducted on the comparative advantage of
Chinese manufactured exports since 2001. This paper undertakes a thorough analysis of the
comparative advantage of Chinese manufactures from 2002 to 2009, not only within the world market
but also in the US market. Second, it is very important for China to stabilize the overseas market
demand and secure exports, this paper shows how China could cope with a crisis.
Keywords China, Manufactures,Export, Comparative advantage,RCA index,
Manufacturingindustries, Export markets, Exports
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
JEL classification – F14
The authors are thankful for the support given by the National Natural Science Foundation of
China, the Scientific Research Fund of the National Planning Office of Philosophy and Social
Science, the Fundamental Research Funds of the Central University, the Scientific Research Fund
of the Education Ministry of China, and the Fundamental Research Funds from 985 Projects.
Chinese
manufactured
exports
107
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 5 No. 2, 2012
pp. 107-126
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/17544401211233507
1. Introduction
In recent years, the economic crisis caused by subprime loans has had a tremendous
influence on the world economy and international trade. As a key player in that world
economy, China has been affected significantly by the crisis, notably in trade, and
particularly in its exports. The decrease in overseas market demand brings about
unprecedented challenges for Chinese exports. The Chinese economy faces more severe
risks than expected. The fall in exports, in particular, poses significant challenges.
Chinese trade registered negative growth from October 2008, and continued to fall in
the first quarter of 2009.
Out of this context, the Chinese Ministry of Commerce maintained that stabilizing
overseas market demand and assuring exports are still top priority. Here, comparative
advantage is very important. In an economic crisis, with fierce competition in the world
market, the comparative advantage of a country’s exports is the primary influence on
that country’s export volume.
This paper will make a thorough analysis of the comparative advantage of Chinese
manufactures from 2002 to 2009, not only within the world market but also in the US
market. Our understanding of the international competitiveness of Chinese export
manufactures allows us to make some reasonable suggestions for the development of
China’s trade.
2. Literature review
Manufactures trade is very significant and complicated. Manufactured products are
more complex than primary commodities, so that the technology level and added value
that a country’s manufactured products have embodies the country’s level of
competitiveness. Scholars in China and abroad have completed, from different
perspectives, numerous empirical studies on the comparative advantage and structure
of Chinese manufactures.
David (1999) calculated the revealed comparative advantage (RCA) index for the
15 countries in the European Union (EU), NAFTA, six countries in Latin America, and
the four Dragons (four countries in East Asia). Lall (2002) made a comparative analysis
of the influence that different categories of Chinese manufactured exports have in East
Asian newly industrializing countries and Latin American countries in 1985 and 1998.
Xiaming and Parker (2001) did a statistical and empirical study, using the RCA index
to evaluate Chinese manufacture trade competitive advantage from 1980 to 1997,
emphasizing the effect that the inflow of foreign capital has made on the comparative
advantage of Chinese high technology (HT) manufactures trade since the reform and
opening-up of China. Bender and Li (2001) analyzed how East Asian (including four
countries in East Asia and East Asian newly industrializing countries) manufactures’
RCA and export patterns differ from those of Latin America in the world market. They
concentrated on three categories of manufacture’s share in the world market and their
trade pattern improvement during 1981-1997, particularly RCA correlations and
variation scope. Schott (2006) gauged the relative sophistication of Chinese exports,
finding that the overlap of China’s exports with those of OECD countries is much
greater than one would predict given low wages, and determined that the prices that
US consumers are willing to pay for China’s exports are substantially lower than those
they are willing to pay for OECD exports. Cui and Syed (2007) found that China
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