Over the past decade, Chinese exports have boomed, increasing far faster than GDP growth. What can account for this explosion? Our paper uses finely detailed Chinese export data (8-digit HS codes) combined with U.S. trade data to explore this question. Although exchange rate policy clearly boosted the trade surplus, and the structure of the economy, e.g. abundant cheap labor, encouraged investment, these alone cannot account for the changing composition and acceleration of exports. We find that the growth in exports is most likely a product of effective Chinese industrial policy and fortuitous timing. The detailed trade data reveal that key “new” technology goods, such as cell phones, LCD screens, and laptops played a critical role.
Finally, we use the data to examine the relationship between Chinese exports and global manufacturing, in particular U.S. manufacturing employment. We find that increased Chinese competition in both domestic and U.S. export markets likely lowered U.S. manufacturing employment between 2000 and 2007. Chinese policy is not, however, wholly responsible. Some job losses, such as in textile production, were no doubt the result of China’s natural comparative advantages, while other U.S. job losses are attributable to relatively low investment and slow GDP growth in the United States following the 2001 recession.
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Last update: March 14, 2012