Why the Dynamic Evolution of China’s Comparative Advantages Must Be Accelerated

For sustained growth, an open economy must keep dynamic its comparative advantages. This is particularly true for developing countries implementing the strategy of economic opening-up. Different from the immediate benefits of an open economy, such as the short-term effects of export and foreign exchange growth, the dynamic evolution of comparative advantages are mainly reflected in changes of the quality, quantity, organization, and allocation of growth factors. Corresponding to different stages of economic opening, new growth factors (or those different from the existing ones in quality and size) will replace the existing ones that used to support foreign investment and trade development, and will support the development of a new round of export-oriented economy, giving rise to structural upgrading and other effects. Thus, the dynamic development of comparative advantages becomes the basis of increasing returns of an open economy. On the other hand, the weakening and stagnation of comparative advantages is the fundamental reason for decrease or withdrawal of external resources, such as foreign direct investment (FDI). The studies and focus on the dynamic evolution of comparative advantages originate in people’s concern over economic reality. How to sustain growth of the Chinese economy? How to prevent China from becoming a loser in globalization? These are two correlated questions.