world growth

world growth

Monday, July 21, 2008

China increasing sophistication of exports

China increasing sophistication of exports
By TIFFANY AUMANN • Advocate Reporter • July 20, 2008

NEWARK -- Twenty years ago, China was known for making toys, shoes and clothing.

Today, the world's largest nation can make just about anything that any other nation can. There's one key reason for the quick catchup: Competition.
Songhua Lin, assistant professor of economics at Denison University, said international partnerships have been an effective way to inject dollars and knowledge into the Chinese economy.
"In order to make it better, you have to introduce competition, and that's coming from abroad," Lin said.
During the past couple decades, exports from China gradually have increased in sophistication.
In the 1980s, exports largely were raw materials. By the late '80s and early '90s, toys, shoes and clothing were flowing out of China.
Increasingly complex products, such as computers and auto parts, have been made in China in the past decade. According to the National Bureau of Economic Research, virtually no product is made by the United States, European Union or Japan that also is not made in China.
China now is the United States' second-largest trading partner, representing about 12 percent of all trade in 2007, according to the United States Census Bureau. Canada, at 18 percent, was the biggest.
China began to emerge as a world trading power after 1978, when its government began a series of economic reforms designed to lead it away from a socialist command economy and toward a market-driven one. Since 1991, the Chinese economy has grown at a rate of 10 percent per year. In 2001, China became a member of the World Trade Organization and was granted normal trading relations with the United States.
In 2007, the American trade deficit with China was $256 billion, about double what it was in 2003 and eight times what it was in 1995 -- $34 billion.


The National Bureau of Economic Research reports the share of China's exports produced by state-owned firms declined from 67 percent in 1995 to 40 percent in 2005. Foreign-invested firms produced a greater share of exports, from 32 percent to 58 percent during the same time period.
Privately owned Chinese firms represent a small portion of exports but had increased their share to about 18 percent in 2005.


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