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Is china climbing up the quality ladder?

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  • Gabor Pula

    (European Central Bank)

  • Daniel Santabárbara

    ()
    (Banco de España)

Abstract

There is an ongoing debate in the literature about the quality content of Chinese exports and to what extent China poses a threat to the market positions of advanced economies. While China’s export structure is very similar to that of the advanced world, its export unit values are well below the level of developed economies. Building on the assumption that unit values reflect quality, the prevailing view of the literature is that China exports low quality varieties of the same products as its advanced competitors. This paper challenges this view by relaxing the assumption that unit values reflect quality. We derive the quality of Chinese exports to the European Union by estimating disaggregated demand functions from a discrete choice model. The paper has three major findings. First, China’s share of the European Union market is larger than would be justified only by its low average prices, implying that the quality of Chinese exports is high compared to many competitors. Second, China has gained quality relative to other competitors since 1995, indicating that China is climbing up the quality ladder. Finally, our analysis of the supply side determinants reveals that the relatively high quality of Chinese exports is related to processing trade and the increasing role of global production networks in China.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/12/Fich/dt1209e.pdf
File Function: First version, February 2012
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1209.

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Length: 30 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:bde:wpaper:1209

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Keywords: Chinese exports; vertical product differentiation; quality ladder; global production networks; discrete choice model; COMEXT database;

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References

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  2. Konstantins Benkovskis & Ramune Rimgailaite, 2010. "The Quality and Variety of Exports from New EU Member States: Evidence from Very Disaggregated Data," Working Papers 2010/02, Latvijas Banka.
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Citations

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Cited by:
  1. Pula, Gabor & Santabárbara, Daniel, 2011. "Is China climbing up the quality ladder? Estimating cross country differences in product quality using Eurostat's COMEXT trade database," Working Paper Series 1310, European Central Bank.
  2. Giancarlo Corsetti & Luca Dedola & Francesca Viani, 2011. "The International Risk-Sharing Puzzle is at Business Cycle and Lower Frequency," Economics Working Papers ECO2011/16, European University Institute.
  3. Benkovskis, Konstantins & Wörz, Julia, 2013. "Non-price competitiveness of exports from emerging countries," Working Paper Series 1612, European Central Bank.
  4. Benkovskis , Konstantins & Wörz , Julia, 2013. "What drives the market share changes? Price versus non-price factors," BOFIT Discussion Papers 18/2013, Bank of Finland, Institute for Economies in Transition.
  5. Giorgia Giovannetti & Marco Sanfilippo & Margherita Velucchi, 2011. "The “China effect” on EU Exports to OECD markets – A focus on Italy," Working Papers - Economics wp2011_17.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  6. Hélène LATZER & Florian MAYNERIS, 2012. "Income distribution and vertical comparative advantage Theory and evidence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012018, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 20 Oct 2012.
  7. Dorrucci, Ettore & Pula, Gabor & Santabárbara, Daniel, 2013. "China's economic growth and rebalancing," Occasional Paper Series 142, European Central Bank.
  8. Giorgia Giovannetti, Marco Sanfilippo and Margherita Velucchi, 2012. "The impact of China on manufacturing exports of Italy and Germany," RSCAS Working Papers 2012/26, European University Institute.
  9. Jose Maria Casado, 2012. "Consumption partial insurance of Spanish households," Banco de Espa�a Working Papers 1214, Banco de Espa�a.

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