Why has China succeeded? And why it will continue to do so

Abstract

The key factor underlying China’s fast development during the last 50 years is its ability to master and accumulate new and more complex capabilities, reflected in the increase in diversification and sophistication of its export basket. This accumulation was policy induced and not the result of the market, and began before 1979. During the last 50 years, China has acquired revealed comparative advantage in the export of both labour-intensive products (following its factor abundance) and sophisticated products, although the latter does not mean that there was leapfrogging. China is exceptionally well positioned (especially taking into account its income per capita) to continue learning and gaining revealed comparative advantage in the export of more sophisticated products. Given adequate policies, carefully thought-out and implemented reforms and skilful management of constraints and risks, China has the potential to continue thriving. This does not mean, however, that high growth will continue indefinitely.

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