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China's Emergence as the Workshop of the World

Jun 2004
Stanford King Center on Global Development Working Paper
216
By  Will Martin, Vlad Manole

China’s emergence as a major exporter of manufactures is well-known. Less well-known perhaps is the rapid transformation towards manufactures of other countries that were poor in 1980. The rapidity of this transformation suggests that common factors, such as vertical specialization in production, may have played an important role. We examine the transformation of China’s exports relative to those of India and other low-income exporters. We find that the share of manufactures rose rapidly in each case, and that the most rapid growth was in relatively skill-intensive manufactures. A key part of China’s export growth came from the emergence of new exports, which occurred rapidly in the 1980s, and less rapidly in the 1990s. In India, by contrast, this process did not begin until the 1990s. Reductions in protection in China and India disproportionately reduced the cost burden on manufactures and agricultural processing. Textiles and clothes are an important special case, with the outcome very heavily distorted by protection imposed under the Multi-Fiber Arrangement. Because of the abolition of those quotas, expansion of China’s exports of these products after 2005 is likely to be very rapid, relative to other, more skill-intensive goods.