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How the Dragon Captured the World Export Markets: Outsourcing and Foreign Investment Lead the Way


  • F. Gerard Adams

    () (Northeastern University)

  • Byron Gangnes

    () (University of Hawaii at Manoa)

  • Yochanan Shachmurove

    () (The City College of The City University of New York and the University of Pennsylvania)


This paper explores several theories regarding how China has become highly successful in capturing world export markets. The paper concludes that increased competitiveness is dependant on, but not limited to several factors discussed in detail including, exchange rate undervaluation, low wage rates and excess labor resources. Direct foreign investment which enabled China to produce products that meet world market specifications, brought new technology and foreign management, played a key factor. Reasons for China’s advantage over other East Asian countries are explored. The merits and methods of various measures of China’s competitiveness and comparative competitiveness are also discussed.

Suggested Citation

  • F. Gerard Adams & Byron Gangnes & Yochanan Shachmurove, 2004. "How the Dragon Captured the World Export Markets: Outsourcing and Foreign Investment Lead the Way," PIER Working Paper Archive 04-042, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  • Handle: RePEc:pen:papers:04-042

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    References listed on IDEAS

    1. Balassa, Bela, 1979. "The Changing Pattern of Comparative Advantage in Manufactured Goods," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 259-266, May.
    2. Ronald W. Jones, 2000. "Globalization and the Theory of Input Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 026210086x, January.
    3. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, Oxford University Press, vol. 80(2), pages 190-207.
    4. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    5. John G. Fernald & Hali J. Edison & Prakash Loungani, 1998. "Was China the first domino? assessing links between China and the rest of emerging Asia," International Finance Discussion Papers 604, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Greenaway, David & Mahabir, Aruneema & Milner, Chris, 2008. "Has China displaced other Asian countries' exports?," China Economic Review, Elsevier, vol. 19(2), pages 152-169, June.
    2. Wim Suyker & Henri de Groot, 2006. "China and the Dutch economy," CPB Document 127, CPB Netherlands Bureau for Economic Policy Analysis.

    More about this item


    China exports; comparative advantage; competitiveness; purchasing power parity; exchange rate; undervaluation; devaluation; international comparisons; foreign direct investment; technology;

    JEL classification:

    • F0 - International Economics - - General
    • F1 - International Economics - - Trade
    • P0 - Economic Systems - - General
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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