China's Integration with the World: Development as a Process of Learning and Industrial Upgrading

43 Pages Posted: 20 Apr 2016

See all articles by Justin Y. Lin

Justin Y. Lin

Peking University - China Center for Economic Research

Yan Wang

Cornell University; African Development Bank

Date Written: December 1, 2008

Abstract

The process of development is full of uncertainties, especially if it is a process of transition from a planned economy to a market oriented one. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This paper attempts to distill lessons from China's reform and opening up process, and investigate the underlying reasons behind China's success in trade expansion and economic growth. From its beginnings with home-grown and second-best institutions, China has embarked on a long journey of reform, experimentation, and learning by doing. It is moving from a comparative advantage-defying strategy to a comparative advantage-following strategy. The country is catching up quickly through augmenting its factor endowments and upgrading industries; but this has been only partially successful. Although China is facing several difficult challenges - including rising inequality, an industrial structure that is overly capital and energy intensive, and related environmental degradation - it is better positioned to tackle them now than it was 30 years ago. This paper reviews the drivers behind China's learning and trade integration and provides both positive and negative lessons for developing countries with diverse natural endowments, especially those in Sub-Saharan Africa.

Keywords: Economic Theory & Research, Emerging Markets, Political Economy, Debt Markets, Access to Finance

Suggested Citation

Lin, Justin Yifu and Wang, Yan, China's Integration with the World: Development as a Process of Learning and Industrial Upgrading (December 1, 2008). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2008. Available at SSRN: https://ssrn.com/abstract=1327268

Justin Yifu Lin (Contact Author)

Peking University - China Center for Economic Research ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Yan Wang

Cornell University ( email )

Ithaca, NY 14853
United States

African Development Bank ( email )

Rue Joseph Anoma
Abidjan, Ivory Coast 01 BP 1387
Ivory Coast (Cote D'ivoire)

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