Reading 4a

Reading 4a - WHATS SO SPECIAL ABOUT CHINAS EXPORTS?* Dani...

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W HAT S SO SPECIAL ABOUT C HINA S E XPORTS ? * Dani Rodrik Harvard University Revised, January 2006 I. Introduction The phenomenal performance of China constitutes the great economic miracle of the last quarter century. China’s economy has expanded by leaps and bounds, at historically unprecedented rates that few economists would have found plausible or feasible ex ante. More importantly, this growth has lifted hundreds of millions of people from deep poverty and has helped improve health, education, and other social standards. China has accomplished all this using its own brand of experimental gradualism--increasingly relying on markets and on price signals, yet until very recently doing so within the boundaries of a highly unorthodox set of institutions. That trade has played a significant role in this transformation is beyond dispute. China would likely have grown even if the global economy had been closed. And the very early stages of Chinese growth, based on rural reform, did not in any significant way rely on global markets. But from the mid-1980s on, one must suppose that China’s growth was fueled and sustained by the opportunities that the world market offered. We can see the increasing footprint of foreign trade and investment in all the major aggregates. The share of exports in GDP rose from virtually nothing in the 1960s to close to 30 percent in 2003, a rate of increase that is much larger than what has been experienced elsewhere in the world (see Figure 1). Inward direct foreign investment has risen from close to zero in the early 1980s to around 5 percent of GDP. The flip * This is a paper prepared for the project on “China and the Global Economy 2010” of the China Economic Research and Advisory Programme. I am indebted to Edwin Lim for his guidance and comments, and to the Programme for financial support. Comments from Yu Yongding and Adrian Wood have also been very helpful. Oeindrila Dube performed superb research assistance.
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2 side of these figures is that China has become one of the world’s biggest trading powers, accounting for 6% of global trade flows (Figure 2). Figure 1 Exports as a share of GDP 0 5 10 15 20 25 30 35 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 China World Source: World Development Indicators Database Figure 2 China's share of world merchandise exports 0% 1% 2% 3% 4% 5% 6% 7% 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Source: World Development Indicators Database
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3 The success with which China has integrated itself into the world economy raises many questions. Drawing the real lessons from this experience is important, not only because China is the stellar example which other developing countries are trying to emulate, but also because the shape of China’s own future policies depend (or should depend) on these lessons. The task is not made easier by the highly unconventional manner in which China has
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Reading 4a - WHATS SO SPECIAL ABOUT CHINAS EXPORTS?* Dani...

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