China's Changing Export Structure: A Factor Based Analysis

Abstract

While China’s stellar export performance is a well-established fact, the issue of diversification of China’s exports continues to be debated. There are differing opinions on the factor proportions in its exports. Some argue that exports continue to be labour-intensive while others have found a reallocation in favour of more skill-based and sophisticated exports. This paper is an attempt to address the ongoing debate. The analysis is based on the SITC export classification criterion that adopts the structure of the HS, so that the smallest modules of the SITC are defined by the HS subheadings. The study finds that post 2001 China’s exports have diversified. The major finding of the study indicates that, based on the competitiveness analysis, the share of high-tech manufactures has increased while the share of unskilled labour-intensive products has gone down during 2001-2006. Post 2001 high tech products command a share of 32 percent in China’s total exports and 43 percent in China’s total imports. This is indicative of the fact that imports of high-tech parts and components are assembled in China to be exported as finished high-tech goods. The study also finds that Imports of high-tech products are sourced mainly from NIES-4, Japan and ASEAN-4 and exported mainly to NIES-4, EU-25 and the United States, i.e. to the developed world. Therefore, one can conclude that China exports technology intensive products on the strength of relatively large share of their imports.