What is so special about China’s exports?

Dana Rodrik writes:

..what is so special about China’s exports is not that they are voluminous or that its large pool of labor gives it a huge labor cost advantage. What stands out is that China sells products that are associated with a productivity level that is much higher than a country at China’s level of income. This helps account both for why China’s trade is viewed as problematic in advanced countries, and for China’s rapid economic growth.

The economically relevant question for sustainability is not whether trade-GDP can keep on rising, but whether China will manage to latch on to higher- and higher-income products over time, and continue to fuel its growth thereby.

Anyone interested in China should read this paper.  The key question is how the Chinese managed this trick.  My gut suggests two factors: the predominance of joint ventures (the best of foreign technology and management, yet with domestic diffusion of best practices), and the benefits of a very large population.  Your best producers will do wonders for the quality of your best ventures.  I am not persuaded by Rodrik’s praise of Chinese industrial policy.

Thanks to the New Economist blog for the pointer.   They also link to a good discussion of U.S. productivity.

Addendum: Here is a link to some dissenting opinions.


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