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China's Integration with the World: Development as a Process of Learning and Industrial Upgrading

  • Yifu, Justin

    (The World Bank)

  • Wang, Yan


    (The World Bank)

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The process of development is full of uncertainties, especially if it is a process of transition from a planned economy to a market oriented one. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This paper attempts to distill lessons from China's reform and opening up process, and investigate the underlying reasons behind China's success in trade expansion and economic growth. From its beginnings with home-grown and second-best institutions, China has embarked on a long journey of reform, experimentation, and learning by doing. It is moving from a comparative advantage-defying strategy to a comparative advantage-following strategy. The country is catching up quickly through augmenting its factor endowments and upgrading industries; but this has been only partially successful. Although China is facing several difficult challenges -- including rising inequality, an industrial structure that is overly capital and energy intensive, and related environmental degradation -- it is better positioned to tackle them now than it was 30 years ago. This paper reviews the drivers behind China's learning and trade integration and provides both positive and negative lessons for developing countries with diverse natural endowments, especially those in Sub-Saharan Africa.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4799.

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Length: 43 pages
Date of creation: 02 Feb 2009
Date of revision:
Handle: RePEc:wbk:wbrwps:4799
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  1. Woo Wing Thye, 1994. "The Art of Reforming Centrally Planned Economies: Comparing China, Poland, and Russia," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 276-308, June.
  2. Guofu Tan & Justin Yifu Lin, 1999. "Policy Burdens, Accountability, and the Soft Budget Constraint," American Economic Review, American Economic Association, vol. 89(2), pages 426-431, May.
  3. Dani Rodrik, 2006. "What's So Special about China's Exports?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(5), pages 1-19.
  4. Perkins, Dwight Heald, 1988. "Reforming China's Economic System," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 601-45, June.
  5. Lin, Justin Yifu, 1992. "Rural Reforms and Agricultural Growth in China," American Economic Review, American Economic Association, vol. 82(1), pages 34-51, March.
  6. Justin Yifu Lin, Fang Cai, and Zhou Li, 1996. "The Lessons of China's Transition to a Market Economy," Cato Journal, Cato Journal, Cato Institute, vol. 16(2), pages 201-231, Fall.
  7. Justin Yifu Lin, 1989. "An Economic Theory of Institutional Change: Induced and Imposed Change," Cato Journal, Cato Journal, Cato Institute, vol. 9(1), pages 1-33, Spring/Su.
  8. Sachs, J.D. & Woo, W.T., 1994. "Structural Factors in the Economic Reforms of China, Eastern Europe and the Former Soviet Union," Papers 94-01, California Davis - Institute of Governmental Affairs.
  9. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
  10. C. Fred Bergsten & Bates Gill & Nicholas R. Lardy, 2006. "China: The Balance Sheet What the World Needs to Know Now about the Emerging Superpower," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa04648.
  11. Wen, Guanzhong James, 1993. "Total Factor Productivity Change in China's Farming Sector: 1952-1989," Economic Development and Cultural Change, University of Chicago Press, vol. 42(1), pages 1-41, October.
  12. Yifu Lin, Justin & Nugent, Jeffrey B., 1995. "Institutions and economic development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 38, pages 2301-2370 Elsevier.
  13. McMillan, John & Whalley, John & Zhu, Lijing, 1989. "The Impact of China's Economic Reforms on Agricultural Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 781-807, August.
  14. Wang, Yijiang, 1993. "Eastern Europe and China: Institutional development as a resource allocation problem," China Economic Review, Elsevier, vol. 4(1), pages 37-47.
  15. Peter Murrell, 1991. "Can Neoclassical Economics Underpin the Reform of Centrally Planned Economies?," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 59-76, Fall.
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