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

Author

Listed:
  • 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)

Abstract

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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    File URL: https://economics.sas.upenn.edu/sites/default/files/filevault/working-papers/04-042.pdf
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    References listed on IDEAS

    as
    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, December.
    3. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
    4. Hali J. Edison & John G. Fernald & 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.).
    5. Jan Voon & Ren Yue, 2003. "China-Asean Export Rivalry In The Us Market," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 8(2), pages 157-179.
    6. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 327-368.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David Greenaway & Aruneema Mahabir & Chris Milner, 2010. "Has China Displaced Other Asian Countries’ Exports?," Palgrave Macmillan Books, in: David Greenaway & Chris Milner & Shujie Yao (ed.), China and the World Economy, chapter 4, pages 60-90, Palgrave Macmillan.
    2. Wim Suyker & Henri de Groot, 2006. "China and the Dutch economy," CPB Document 127, CPB Netherlands Bureau for Economic Policy Analysis.

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    More about this item

    Keywords

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

    JEL classification:

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

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