Why Has China Succeeded - And Why it Will Continue to Do So

Levy Economics Institute, Working Papers Series No. 611

48 Pages Posted: 21 Aug 2010

See all articles by Jesus Felipe

Jesus Felipe

Asian Development Bank

Utsav Kumar

Asian Development Bank

Norio Usui

Asian Development Bank - Philippines Country Office

Arnelyn Abdon

Asian Development Bank

Date Written: August 19, 2010

Abstract

The key factor underlying China’s fast development during the last 50 years is its ability to master and accumulate new and more complex capabilities, reflected in the increase in diversification and sophistication of its export basket. This accumulation was policy induced and not the result of the market, and began before 1979.

Despite its many policy mistakes, if China had not proceeded this way, in all likelihood it would be a much poorer country today. During the last 50 years, China has acquired revealed comparative advantage in the export of both labor-intensive products (following its factor abundance) and sophisticated products, although the latter does not indicate that there was leapfrogging. Analysis of China’s current export opportunity set indicates that it is exceptionally well positioned (especially taking into account its income per capita) to continue learning and gaining revealed comparative advantage in the export of more sophisticated products. Given adequate policies, carefully thought-out and implemented reforms, and skillful management of constraints and risks, China has the potential to continue thriving. This does not mean, however, that high growth will continue indefinitely.

Keywords: China, Capabilities, Diversification, Export-led Growth, Leapfrogging, Open Forest, Product Space, Sophistication

JEL Classification: O20, O25, O53

Suggested Citation

Felipe, Jesus and Kumar, Utsav and Usui, Norio and Abdon, Arnelyn May, Why Has China Succeeded - And Why it Will Continue to Do So (August 19, 2010). Levy Economics Institute, Working Papers Series No. 611 . Available at SSRN: https://ssrn.com/abstract=1661920 or http://dx.doi.org/10.2139/ssrn.1661920

Jesus Felipe (Contact Author)

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Utsav Kumar

Asian Development Bank ( email )

6 ADB Avenue
Central and West Asia Department
Mandaluyong City
Philippines

HOME PAGE: http://works.bepress.com/kumarutsav/

Norio Usui

Asian Development Bank - Philippines Country Office ( email )

6 ADB Avenue
Mandaluyong
Manila, 1550
Philippines
63-2-683-1012 (Phone)
63-2-683-1030 (Fax)

Arnelyn May Abdon

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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