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The Fight for the Middle: Upgrading, Competition, and Industrial Development in China


  • Brandt, Loren
  • Thun, Eric


Summary When China acceded to World Trade Organization (WTO) in 2001, there were fears that Chinese firms would lose market share in key sectors to foreign-invested enterprises (FIEs). Although aggregate data often indicate a shift in favor of FIEs, indigenous firms in many cases have slowly increased market share and deepened their technical capabilities. Through an analysis of aggregate data and three sectors, we show how the dynamics of competition between Chinese and FIEs in China's domestic market enhance the upgrading prospects for Chinese firms. China represents a new model of development in several important respects: industrial upgrading efforts are often domestically driven, within this domestic market there is intense competition between both domestic and foreign firms, and this competition is driving and stimulating the upgrading efforts of domestic firms.

Suggested Citation

  • Brandt, Loren & Thun, Eric, 2010. "The Fight for the Middle: Upgrading, Competition, and Industrial Development in China," World Development, Elsevier, vol. 38(11), pages 1555-1574, November.
  • Handle: RePEc:eee:wdevel:v:38:y:2010:i:11:p:1555-1574

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    References listed on IDEAS

    1. John Humphrey & Hubert Schmitz, 2002. "How does insertion in global value chains affect upgrading in industrial clusters?," Regional Studies, Taylor & Francis Journals, vol. 36(9), pages 1017-1027.
    2. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
    3. Hubert Schmitz, 2007. "Reducing Complexity in the Industrial Policy Debate," Development Policy Review, Overseas Development Institute, vol. 25(4), pages 417-428, July.
    4. Steinfeld, Edward S., 2004. "China's Shallow Integration: Networked Production and the New Challenges for Late Industrialization," World Development, Elsevier, vol. 32(11), pages 1971-1987, November.
    5. Alice H. Amsden & Wan-wen Chu, 2003. "Beyond Late Development: Taiwan's Upgrading Policies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011980, January.
    6. Gereffi, Gary, 1999. "International trade and industrial upgrading in the apparel commodity chain," Journal of International Economics, Elsevier, vol. 48(1), pages 37-70, June.
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    Cited by:

    1. Francesca Checchinato & Lala Hu & Alessandra Perri & Tiziano Vescovi, 2013. "Internationalization of a Chinese "born glocal" brand: the case of Goodbaby," Working Papers 25, Department of Management, Università Ca' Foscari Venezia.
    2. Can Huang & Naubahar Sharif, 2016. "Global technology leadership: The case of China," Science and Public Policy, Oxford University Press, vol. 43(1), pages 62-73.
    3. Liu, Xiaohui & Hodgkinson, Ian R. & Chuang, Fu-Mei, 2014. "Foreign competition, domestic knowledge base and innovation activities: Evidence from Chinese high-tech industries," Research Policy, Elsevier, vol. 43(2), pages 414-422.
    4. Yu, Yang & Li, Hong & Che, Yuyuan & Zheng, Qiongjie, 2017. "The price evolution of wind turbines in China: A study based on the modified multi-factor learning curve," Renewable Energy, Elsevier, vol. 103(C), pages 522-536.
    5. repec:gam:jsusta:v:9:y:2017:i:11:p:2133-:d:119529 is not listed on IDEAS
    6. He, Xiyou & Mu, Qing, 2012. "How Chinese firms learn technology from transnational corporations: A comparison of the telecommunication and automobile industries," Journal of Asian Economics, Elsevier, vol. 23(3), pages 270-287.
    7. Moriki Ohara, 2014. "Stratified domestic demand: the “seedbed effect” on automobile firms observed from county-level sales data," Chapters,in: The Disintegration of Production, chapter 7, pages 179-212 Edward Elgar Publishing.
    8. Eric Thun, 2016. "The Disintegration of Production: Firm Strategy and Industrial Development in China edited by Mariko Watanabe , Cheltenham , Edward Elgar , 2014 , vii + 347 pp," The Developing Economies, Institute of Developing Economies, vol. 54(3), pages 257-260, September.
    9. Brandt, Loren & Thun, Eric, 2016. "Constructing a Ladder for Growth: Policy, Markets, and Industrial Upgrading in China," World Development, Elsevier, vol. 80(C), pages 78-95.
    10. repec:pal:jintbs:v:48:y:2017:i:6:d:10.1057_s41267-017-0083-y is not listed on IDEAS
    11. Nahm, Jonas & Steinfeld, Edward S., 2014. "Scale-up Nation: China’s Specialization in Innovative Manufacturing," World Development, Elsevier, vol. 54(C), pages 288-300.
    12. Abdalla, Carla Caires & Zambaldi, Felipe, 2016. "Ostentation and funk: An integrative model of extended and expanded self theories under the lenses of compensatory consumption," International Business Review, Elsevier, vol. 25(3), pages 633-645.

    More about this item


    China industrialization FDI upgrading emerging markets automotive;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L6 - Industrial Organization - - Industry Studies: Manufacturing


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