The Rise of Chinese Exports

Abstract

The growth of Chinese exports both in volume and in market share over the past two decades is a singular event in the history of world trade. Using data from 1995-2005, we document this growth in a variety of ways. First, we show that the expanded trade is pervasive. Virtually every country in the world has seen China claim a larger share of its import market. Then, we use Constant Market Share (CMS) analysis to try to determine which country or countries have lost market share as China’s trade has grown. Contrary to much discussion in the popular press, we find strong evidence that other developing countries have not seen export shares fall as a result of China’s gains. Rather, our results suggest that China’s share growth has come largely at the expense of exporters based in Japan and the United States. We then turn to an attempt to identify the factor or factors responsible for export growth. Using a large set of data disaggregated at the 5-digit SITC level on trade among 75 countries we look at changes over the period in import unit values. We find that China has maintained a relatively constant price advantage over U.S. and Japanese exports. In addition, we use 3-digit level data to estimate a heterogeneous-firm model that examines the probability of successful entry by a firm into an export market. We find strong evidence that the growth of Chinese exports is due to entry by new firms within any sectors, probably engendered by firm level technological advance or entry of foreign firms that have begun to produce in and export from China.