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On the Sources of China’s Export Growth

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  • Roberto Álvarez
  • Sebastián Claro

Abstract

We use detailed data on Chilean imports between 1990 and 2005 to analyze the causes of China’s import penetration relative to other countries. China exports a wide variety of products. The growth in China’s exports, however, is mainly driven by an increase in import penetration within common product categories with the rest of the world—the intensive margin—rather than by an increase in the number of product varieties exported—the extensive margin. Surprisingly, the growth in the intensive margin is explained by an increase in exported quantities without a significant fall in the relative price of Chinese varieties. This apparent paradox suggests that an increase in either the number of unobserved varieties or the willingness to pay for Chinese products—an increase in the relative quality of Chinese products—is the driving force behind China’s export performance. We present evidence regarding China’s export prices, the similarity of China’s export bundle to that of developed countries, and the relative quality of Chinese products, to conclude that improvements in the quality of Chinese products is an important dimension of Chinese export growth.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 426.

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Date of creation: Aug 2007
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Handle: RePEc:chb:bcchwp:426

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  1. J. Bradford Jensen & Andrew Bernard & Peter Schott, 2005. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers 05-19, Center for Economic Studies, U.S. Census Bureau.
  2. Leamer, Edward E, 1987. "Paths of Development in the Three-Factor, n-Good General Equilibrium Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(5), pages 961-99, October.
  3. Castro, Lucio & Olarreaga, Marcelo & Saslavsky, Daniel, 2006. "The impact of trade with China and India on Argentina’s manufacturing employment," MPRA Paper 538, University Library of Munich, Germany.
  4. James Harrigan, 1996. "Technology, factor supplies, and international specialization: estimating the neoclassical model," Staff Reports 15, Federal Reserve Bank of New York.
  5. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  6. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  7. Sebastian Claro, 2009. "FDI Liberalization as a Source of Comparative Advantage in China," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 13(4), pages 740-753, November.
  8. Juan Carlos Hallak & Peter K. Schott, 2008. "Estimating Cross-Country Differences in Product Quality," NBER Working Papers 13807, National Bureau of Economic Research, Inc.
  9. James E. Rauch, 1996. "Networks versus Markets in International Trade," NBER Working Papers 5617, National Bureau of Economic Research, Inc.
  10. Jorge Blázquez-Lidoy & Javier Rodríguez & Javier Santiso, 2006. "Angel or Devil? China's Trade Impact on Latin American Emerging Markets," OECD Development Centre Working Papers 252, OECD Publishing.
  11. Roberto Álvarez; & Sebastián Claro, 2008. "David Versus Goliath: The Impact of Chinese Competition on Developing Countries," Working Papers Central Bank of Chile, Central Bank of Chile 478, Central Bank of Chile.
  12. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
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