September 25, 2005

Myths and realities as the dragon's roar gets louder

Myth Number 2 is that China’s exports are all T-shirts, trainers and other low-tech (with apologies to Nike) products. Lehman Brothers points out that while textiles have been one of the drivers of the trade surplus, so increasingly have high-tech goods such as telecommunications equipment and computers. A fifth of the trade surplus is accounted for by such items, a reminder to the world of the competitive threat China represents up and down the value chain.

The third myth is perhaps the most enduring. It is that China is essentially just a low-cost location for assembling products for the rest of the world’s consumers. The trade surplus is therefore the logical result of this. In fact, as Hedrick-Wong points out, China is neither particularly dependent on exports nor on foreign direct investment. While exports are large, about 36% of gross domestic product, so are imports, 34%. The difference puts China in a very different position to, say, Japan during its phase of dramatic export-led growth two to three decades ago.


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