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Leading Dragons phenomenon : new opportunities for catch-up in low-income countries


  • Chandra, Vandana
  • Lin, Justin Yifu
  • Wang, Yan


Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy and occurs through a process of continuous industrial and technological upgrading. Since the 18th century, all countries that industrialized successfully in Europe, North America and East Asia followed their comparative advantage and leveraged the late-comer advantage to emulate the leader-follower flying geese pattern of industrial upgrading. The large dynamic emerging market countries such as China, India and Brazil are also engaged in industrial upgrading but with a critical difference. In particular, because of its sheer size, China has absorbed nearly all labor-intensive jobs and become the world’s largest exporter of labor-intensive products. The current view is that China’s dominance hinders poor countries from developing similar industries. The authors argue that industrial upgrading has increased wages and is causing China to graduate from labor-intensive to more capital- and technology-intensive industries. These industries will shed labor and create a huge opportunity for lower wage countries to start a phase of labor-intensive industrialization. This process, called the Leading Dragon Phenomenon, offers an unprecedented opportunity to low-income Sub-Saharan Africa where the industrial sector is underdeveloped and investment capital and entrepreneurial skills are leading constraints to manufacturing. It can seize the opportunity and resolve the constraints by attracting some of the OFDI flowing currently from China, India and Brazil into the manufacturing sectors of other developing countries. All low-income countries will compete but to catch the jobs spillover from China, the winner must implement credible economic development strategies that are consistent with its comparative advantage.

Suggested Citation

  • Chandra, Vandana & Lin, Justin Yifu & Wang, Yan, 2012. "Leading Dragons phenomenon : new opportunities for catch-up in low-income countries," Policy Research Working Paper Series 6000, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6000

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    References listed on IDEAS

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    Cited by:

    1. Justin Yifu LIN & Yan WANG, 2015. "China’s Contribution to Development Cooperation: Ideas, Opportunities and Finances," Working Papers P119, FERDI.
    2. Lin, Justin Yifu & Wang, Yan, 2014. "China-Africa co-operation in structural transformation: Ideas, opportunities, and finances," WIDER Working Paper Series 046, World Institute for Development Economic Research (UNU-WIDER).
    3. repec:ocp:dbbook:9-789954-971727 is not listed on IDEAS
    4. Philip Schellekens, 2013. "A Changing China : Implications for Developing Countries," World Bank Other Operational Studies 16115, The World Bank.

    More about this item


    Economic Theory&Research; Emerging Markets; Achieving Shared Growth; Debt Markets; E-Business;

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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