742 D. Lo and.h chan Table 6. Structural change in Chinese industry (%), 1980-96. Sources: ZGJTN (1993 pp.142-144,148-149,153-154);ZTN(1997,p.424) (a)1980(b)1988(c)1996(b)-(a)(c)-(b) I. Light industry-using farm products as 34.56 222 raw materials 2. Light industry-using 11.22 14.84 14.37 0.47 products as raw materials lustry-extract +0.62 4. Heavy industry--raw materials +177 1. 1. Textile, clothing and leather industry 5. 1. Mechanical and electronics industry 26.0827.16+4.12 5.1.1. Electronics industry 4.86 +1.45 Notes: Figures are sectoral shares of Chinese industry as a whole in terms of gross output value at current rices Data cover township-and-above independently accounting industrial enterprises. Mechanical and electronics industry encompasses the following sectors: metal products, machinery, transport equipment, electrical equipment, electronics and instruments. A minor proportion of these sectors are classified unde Go tegory (2)in the table-i.e, light industries using non-farm products as raw materials. Electronics refers he electronics and telecommunication equipment industry. hen-as one can see it by looking back at Table 1, where the growth of machinery and transport equipment exports during 1980-88 lagged behind total manufacturing exports. This mis-match of structural change in output and exports in the 1980s appears to contradict the expectation of standard neoclassical theory which empha sizes the allocative efficiency gains through the transfer of resources to the more dynamic, higher productivity exporting sector as the main contribution of exports to growth. What, then, is the main channel through which foreign trade contributes to Chinas economic growth? Our account begins with a phenomenal development over the period that has beer felt by virtually the entire Chinese population: the consumption revolution signified by the explosive growth of a wide range of consumer durables. Starting from almost nowhere in the early 1980s, by the end of the decade, China became one of the worlds biggest producers of consumer durables like television receivers, washing machines, household refrigerators, air conditioners, cassette recorders, microwave ovens, electric pokers, etc In the case of colour TV sets, the annual output volume surged from 0.03 million in 1980 to 10.38 million in 1988. This pace of growth is also especially visible in washing machines and refrigerators, another two representative items: the former increased its annual output volume from 0. 25 million to 10.47 million, while he latter from 0.05 million to 7.58 million Two factors are discernible as having been chiefly responsible for the consumption revolution. The first, concerning the supply side, is technology imports. Within a few years, a huge production capacity was built up through the importation of numerous turn-key plants or production lines. In the case of colour TV receivers, for example, 110 production lines of different designs were imported during 1984-88. The second factor concerns the demand side Underpinned by China's specific pattern of income distribution, the domestic demand condition was all-favourable for the consumption revolution as a huge number of consumers were out to purchase similar products at the same time. There was readily available a mass consumption market of enormous 01998 John Wiley Sons, Ltd J.mnt.Dev.10,733-74901998)then Ð as one can see it by looking back at Table 1, where the growth of machinery and transport equipment exports during 1980±88 lagged behind total manufacturing exports. This mis-match of structural change in output and exports in the 1980s appears to contradict the expectation of standard neoclassical theory which empha￾sizes the allocative eciency gains through the transfer of resources to the more dynamic, higher productivity exporting sector as the main contribution of exports to growth. What, then, is the main channel through which foreign trade contributes to China's economic growth? Our account begins with a phenomenal development over the period that has been felt by virtually the entire Chinese population: the `consumption revolution' signi®ed by the explosive growth of a wide range of consumer durables. Starting from almost nowhere in the early 1980s, by the end of the decade, China became one of the world's biggest producers of consumer durables like television receivers, washing machines, household refrigerators, air conditioners, cassette recorders, microwave ovens, electric cookers, etc. In the case of colour TV sets, the annual output volume surged from 0.03 million in 1980 to 10.38 million in 1988. This pace of growth is also especially visible in washing machines and refrigerators, another two representative items: the former increased its annual output volume from 0.25 million to 10.47 million, while the latter from 0.05 million to 7.58 million. Two factors are discernible as having been chie¯y responsible for the consumption revolution. The ®rst, concerning the supply side, is technology imports. Within a few years, a huge production capacity was built up through the importation of numerous turn-key plants or production lines. In the case of colour TV receivers, for example, 110 production lines of di€erent designs were imported during 1984±88. The second factor concerns the demand side. Underpinned by China's speci®c pattern of income distribution, the domestic demand condition was all-favourable for the consumption revolution as a huge number of consumers were out to purchase similar products at the same time. There was readily available a mass consumption market of enormous Table 6. Structural change in Chinese industry (%), 1980±96. Sources: ZGJTN (1993, pp. 142±144, 148±149, 153±154); ZTN (1997, p. 424). (a) 1980 (b) 1988 (c) 1996 (b)± (a) (c)±(b) 1. Light industry Ð using farm products as raw materials 34.56 32.34 28.67 ÿ2.22 ÿ3.67 2. Light industryÐ using non-farm products as raw materials 11.22 14.84 14.37 ‡3.62 ÿ0.47 3. Heavy industryÐ extraction 7.37 5.99 6.61 ÿ1.38 ‡0.62 4. Heavy industryÐ raw materials 22.31 20.38 22.15 ÿ1.93 ‡1.77 5. Heavy industryÐ manufacturing 24.54 26.45 28.20 ‡1.91 ‡1.75 1.1. Textile, clothing and leather industry 18.21 14.84 12.13 ÿ3.37 ÿ2.71 5.1. Mechanical and electronics industry 21.96 26.08 27.16 ‡4.12 ‡1.08 5.1.1. Electronics industry 1.62 3.41 4.86 ‡1.79 ‡1.45 Notes: Figures are sectoral shares of Chinese industry as a whole in terms of gross output value at current prices. Data cover township-and-above independently accounting industrial enterprises. Mechanical and electronics industry encompasses the following sectors: metal products, machinery, transport equipment, electrical equipment, electronics and instruments. A minor proportion of these sectors are classi®ed under category (2) in the tableÐ i.e., light industries using non-farm products as raw materials. Electronics refers to the electronics and telecommunication equipment industry. #1998 John Wiley & Sons, Ltd. J. Int. Dev. 10, 733±749 (1998) 742 D. Lo and T. M. H. Chan