Is China's manufacturing sector becoming more high‐tech?

Abstract

Purpose The paper assesses the extent to which China's comparative advantage in manufacturing has shifted towards higher‐tech sectors between 1987 and 2005 and proposes possible explanations for the shift. Design/methodology/approach Revealed comparative advantage (RCA) indices for 27 product groups, representing high‐, medium and low‐tech sectors have been calculated. Examination of international market attractiveness complements the RCA analysis. Findings for selected sectors are evaluated in the context of other evidence. Findings While China maintains its competitiveness in low‐tech labour intensive products, it has gained RCA in selected medium‐tech sectors (e.g. office machines and electric machinery) and the high‐tech telecommunications and automatic data processing equipment sectors. Evidence from firm and sector specific studies suggests that improved comparative advantage in medium and high‐tech sectors is based on capabilities developing through combining international technology transfer and learning. Research limitations/implications The quantitative analysis does not explain the shifts in comparative advantage, though the paper suggests possible explanations. Further research at firm and sector levels is required to understand the underlying capability development of Chinese enterprises and the relative competitiveness of Chinese and foreign invested enterprises. Practical implications Western companies should take account of capability development in China in forming their international manufacturing strategies. The rapid shifts in China's comparative advantage have lessons for other industrialising countries. Originality/value While RCA is a well‐known methodology, its application at the disaggregated product group level combined with market attractiveness assessment is distinctive. The paper provides a broad assessment of changes in Chinese manufacturing as a basis for further research on capability development at firm and sector levels.