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Technological Upgrading in China and India: What Do We Know?

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  • Jaejoon Woo

    (OECD)

Abstract

This paper studies sources of technological upgrading in China and India. What is striking about the impressive growth of China and (to a lesser degree) India is that they export products associated with a high productivity level that is much higher than a country at their income level. China’s export bundle has changed dramatically, diversifying into technologyintensive products. China is now the largest exporter of high-technology products in the world. Exports of India are still significantly less technologically sophisticated, while India has been more successful in exports of business and information technology (IT) services. It presents empirical evidence on the important role of FDI inflows and imported capital goods that embody new technology for TFP growth in a large panel of advanced and developing countries over 1970-2007. Consistent with the cross-country evidence, micro-data and case studies strongly suggest that FDI and import of capital goods have contributed to rapid technological upgrading especially in China. Puzzlingly, however, the TFP level in China is much lower than would be expected from its score on Index of Technological Sophistication of exports, raising a doubt about whether the shift in export bundle towards high-technology products is associated with a technological sophistication of domestic contents of export products. An important explanation appears to be China’s prime role as a final assembler of international production network. The magnitude of reversal in net export position of China across the two categories, intermediate and finished goods, is striking, which implies that more and less developed economies are being affected very differently by China’s rise. With a view to upgrading the capability to absorb advanced technologies and innovate, China and India have increasingly emphasised human capital, skill-intensive industries and R&D efforts. Nonetheless, our analysis shows that there is still an enormous scope for technological catching-up over the next decades. Modernisation technologique en Chine et en Inde : Que savons-nous? Ce papier étudie les sources de modernisation technologique en Chine et Inde. Ce qui est frappant dans la croissance impressionnante de la Chine et, dans une moindre mesure, de l’Inde est que ces pays exportent des produits associés à un haut niveau de productivité qui est bien plus grand qu’un pays de leur niveau de revenu. La structure des exportations de la Chine a fondamentalement changé, se diversifiant en produits intensifs en technologie. La Chine est dorénavant le plus grand exportateur du monde de produits de haute technologie. Les exportations de l’Inde restent significativement moins sophistiquées technologiquement, quoique l’Inde ait connu davantage de succès dans les exportations de services de technologie du commerce ainsi que de l’information et de la communication (TIC). Ce papier présente des preuves empiriques du rôle important des flux entrants d’IDE et des biens de capital importés comprenant la nouvelle technologie pour la croissance de PGF pour un large panel de pays avancés ou en développement sur la période 1970-2007. En ligne avec les preuves longitudinales, données microéconomiques et études de cas, il suggère fortement que les IDE et importations de biens de capital ont contribué à la rapide modernisation de technologie, particulièrement en Chine. Curieusement, cependant, le niveau de PGF en China est bien plus bas qu’espéré au regard de son Indice de Sophistication Technologique des Exportations, faisant naître le doute que la transformation de la structure des exportations vers des produits de haute-technologie est associée avec à une sophistication technologique du contenu national des produits d’exportation. Une explication importante réside dans le rôle de premier plan de la Chine en tant qu’assembleur final de la chaîne de production mondiale. La magnitude du revirement de la position nette des exportations de la China entre les deux catégories, produits intermédiaires et finaux, est saisissante, ce qui implique que les économies développées sont plus ou moins affectées et de façon très différente par la montée de la Chine. Dans l’optique d’améliorer la capacité d’absorber les technologies avancées et les innovations, la Chine et l’Inde ont mis l’accent sur le capital humain, les industries intensives en compétences et les efforts en R&D. Néanmoins, notre analyse montre qu’il reste une place énorme pour le rattrapage technologique dans les prochaines décennies.

Suggested Citation

  • Jaejoon Woo, 2012. "Technological Upgrading in China and India: What Do We Know?," OECD Development Centre Working Papers 308, OECD Publishing.
  • Handle: RePEc:oec:devaaa:308-en
    DOI: 10.1787/5k9gs212r4tf-en
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    Cited by:

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    2. Gong, Yundan & Hanley, Aoife, 2021. "Exports and new products in China - A generalized propensity score approach with firm-to-firm spillovers," KCG Working Papers 24, Kiel Centre for Globalization (KCG).
    3. Stephan Huber, 2018. "Product Sophistication and Spillovers from Foreign Direct Investment," Contributions to Economics, in: Product Characteristics in International Economics, chapter 0, pages 51-90, Springer.
    4. Victoria Golikova & Boris Kuznetsov, 2017. "Perception of risks associated with economic sanctions: the case of Russian manufacturing," Post-Soviet Affairs, Taylor & Francis Journals, vol. 33(1), pages 49-62, January.
    5. I. Shovkun, 2019. "Investment climate as a factor of industrial development in Ukraine," Economy and Forecasting, Valeriy Heyets, issue 4, pages 70-103.
    6. Saloni Khanderia, 2018. "The Information Technology Agreement and the ‘Make-in-India’ Initiative," Foreign Trade Review, , vol. 53(2), pages 98-115, May.
    7. André Roncaglia De Carvalho & - André M. Marques, 2018. "Economic Development And Inflation: A Theoretical And Empirical Analysis," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 41, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    chaine mondiale de production; classification technologique des exportations; croissance; export processing; FDI; growth; international production network; modernisation technologique; PGF; technological classification of export; technological upgrading; technology diffusion; TFP; traitement des exportations; transfert de technologie;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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