A Trade Tale of Two Countries: China and India
28 Pages Posted: 10 Aug 2011
Date Written: August 10, 2011
The paper first analyzes the pattern of trade for China and India in the new century. We find that: (1) Both countries have high openness ratios that positively associated with their growing labor productivity over years. (2) China’s world export share keeps increasing whereas India maintains a stable but relatively small world exporting share in the new century. (3) Both countries exhibit a large extent to intra-industry trade though both export a large proportion of heavy-industry manufacturing products. (4) China exports more complicated and sophisticated products than India, though the gap is narrowing down over years. (4) India exports a significant share of high-technology products, though such a proportion is much smaller than that of China, when taking processing trade into account. (5) Processing trade plays a dominant role for China’s exports whereas it is relatively unimportant for India. We then seek for different policy settings in the two countries to interpret such similarity and differences. We conclude that the key reason for different trade performance in the two countries is the late adoption of the outward-promotion policy of India compared to that of China. To illustrate this point, we provide a careful scrutiny by the setup of special economic zones, by the access of the GATT/WTO, by the evolution of tariff reductions, and even by trade facilitation in the two countries.
Keywords: Trade Pattern, Intra-industry Trade, Export Sophistication, Revealed Comparative Advantage, Bilateral Trade, Trade Facilitation
JEL Classification: F10, F11, F12
Suggested Citation: Suggested Citation