744 D. Lo and TM h chan Reflected in the dimension of foreign trade the sustainability of economic growth thus hinges on the expansion of Chinese exports at a pace comparable to that of imports. This is not always possible, because what China could use to exchange for the industrial inputs and machinery were mainly low value-added, labour-intensive exports for which it had the comparative advantage. The fact that China ran into trade deficits in 10 of the 12 years before 1990 seems to be partly ascribable to this pressure on trade balance arising from the logic of industrial growth. That the only year in 1990-96 when China again ran into trade deficits (i.e. 1993) was exactly the one that the imports of mechanical and electronic products growing at an almost unprecedented rate of 42 per cent also appears to be no coincidence. In a more clear cut manner, the secular deterioration in the (net barter) terms of trade shown in igure 2 further indicates that over most of the 1980s China followed an unfavourable trend of international specialization. This deterioration is similar to the rest of the developing world, but is in sharp contrast with the advanced capitalist world(which have had marked improvement) and the East Asian NICs. On the whole, the consumption-led, import-dependent pattern of economic growth of the 1980s thus appears to be either non-sustainable or sustained at heavy costs signified by the deterioration of the terms of trade It is against this background that Chinas rapid exports expansion of mechanical and electronic products since 1988 appears to be so important. Although still 120 Developed countries I East Asian NICS china 80 Developing countries 60 1983 1986 Figure 2. China's terms of trade in international comparison(1980= 100). Sources figures from World Bank, World Development Report (various years): East Asia (i.e. South Korea, Taiwan, Hong Kong and Singapore)figures from International M Fund, World Economic Outlook, (October 1993, p 159); and (May 1996, p. 147): Otl International Monetary Fund International Financial Statistics Yearbook, (various years). 01998 John Wiley Sons, Ltd J.mnt.Dev.10,733-74901998)Re¯ected in the dimension of foreign trade, the sustainability of economic growth thus hinges on the expansion of Chinese exports at a pace comparable to that of imports. This is not always possible, because what China could use to exchange for the industrial inputs and machinery were mainly low value-added, labour-intensive exports for which it had the comparative advantage. The fact that China ran into trade de®cits in 10 of the 12 years before 1990 seems to be partly ascribable to this pressure on trade balance arising from the logic of industrial growth. That the only year in 1990±96 when China again ran into trade de®cits (i.e. 1993) was exactly the one that the imports of mechanical and electronic products growing at an almost unprecedented rate of 42 per cent also appears to be no coincidence. In a more clear￾cut manner, the secular deterioration in the (net barter) terms of trade shown in Figure 2 further indicates that over most of the 1980s China followed an unfavourable trend of international specialization. This deterioration is similar to the rest of the developing world, but is in sharp contrast with the advanced capitalist world (which have had marked improvement) and the East Asian NICs. On the whole, the consumption-led, import-dependent pattern of economic growth of the 1980s thus appears to be either non-sustainable or sustained at heavy costs signi®ed by the deterioration of the terms of trade. It is against this background that China's rapid exports expansion of mechanical and electronic products since 1988 appears to be so important. Although still Figure 2. China's terms of trade in international comparison (1980 ˆ 100). Sources: Chinese ®gures from World Bank, World Development Report (various years): East Asian NICs (i.e. South Korea, Taiwan, Hong Kong and Singapore) ®gures from International Monetary Fund, World Economic Outlook, (October 1993, p. 159); and (May 1996, p. 147); Others from International Monetary Fund. International Financial Statistics Yearbook, (various years). #1998 John Wiley & Sons, Ltd. J. Int. Dev. 10, 733±749 (1998) 744 D. Lo and T. M. H. Chan