Machinery and China's Trade-Growth Nexus 735 embodied in the impact of trade on growth and the spectacular expansion of non- labour-intensive exports in recent years This anized in owing way. 2 presents evidence indicating that Chinas exports expansion is not reducible to the outcome of its ' natural comparative advantage, but is increasingly underpinned by the competitiveness of its industry. Section 3 turns to the growth side, presenting a schematic account of the growth pattern that centres around technological imports and development. On this basis, Section 4 offers a discussion of possible factors that have contributed to the formation of competitiveness of the dynamic industries. Section 5 concludes the pap 2 CHINAS MANUFACTURING EXPORTS: COMPARATIVE OR COMPETITIVE ADVANTAGE? Is Chinas exports expansion in the reform era reflecting mainly the realization of its given'or'natural comparative advantage? Lardy's affirmative answer is based on the observation that manufacturing products, which are considered to be more labour intensive in production than primary products, have accounted for a fast increasing share of total exports. Similarly, Panagariya(1993)corroborates by noting that within total exports light industrial products have shot up while heavy industrial products have declined, and light industry is considered to be labour-intensive relative to heavy industry Moving down to more disaggregated levels of the commodity composition of Chinas exports, however, the picture becomes complex. The data in Table I highlight the fact that, along with the increasing share of manufactures in total merchandise exports, there is an even more conspicuous expansion of the share of machinery and transport equipment in total manufacturing exports, from 8 per cent in 1988 to Table 1. Chinas manufacturing exports and imports (SITc classification), 1980-96 Sources:zIN(1996.pp.581-582);zZ(1997,p.128) (a)1980(b)1988c)1996(b)/(a)c)/(b) Exports(USS100 m Total merchandise (SITC 0-9) 1511 Total manufactures(SITC 5-8) 1291 Machinery and transport equipment 2.61 (SITC 7) Imports(USS100 m) T 1388 77 2.51 Total manufactures 131 452 3.45 2.51 Machinery and transport equipment 16 48 3.27 3.28 Total manufactures 0.69 Machinery and transport equipment 0.16 0.64 Notes: Strict king, manufactures are defined as SITC (standard international trade categorie category 68(non-ferrous metals)are not always available. Note that startin reviously under category 9(commodities not classified elsewhere)have been re- ous categories from 0 to 8. Hence, there is some degree of non-comparability of da hat year. 01998 John Wiley Sons, Ltd J.mnt.Dev.10,733-749(1998)embodied in the impact of trade on growth and the spectacular expansion of non￾labour-intensive exports in recent years. This paper is organized in the following way. Section 2 presents evidence indicating that China's exports expansion is not reducible to the outcome of its `natural' comparative advantage, but is increasingly underpinned by the competitiveness of its industry. Section 3 turns to the growth side, presenting a schematic account of the growth pattern that centres around technological imports and development. On this basis, Section 4 o€ers a discussion of possible factors that have contributed to the formation of competitiveness of the dynamic industries. Section 5 concludes the paper. 2 CHINA'S MANUFACTURING EXPORTS: COMPARATIVE OR COMPETITIVE ADVANTAGE? Is China's exports expansion in the reform era re¯ecting mainly the realization of its `given' or `natural' comparative advantage? Lardy's armative answer is based on the observation that manufacturing products, which are considered to be more labour￾intensive in production than primary products, have accounted for a fast increasing share of total exports. Similarly, Panagariya (1993) corroborates by noting that within total exports light industrial products have shot up while heavy industrial products have declined, and light industry is considered to be labour-intensive relative to heavy industry. Moving down to more disaggregated levels of the commodity composition of China's exports, however, the picture becomes complex. The data in Table 1 highlight the fact that, along with the increasing share of manufactures in total merchandise exports, there is an even more conspicuous expansion of the share of machinery and transport equipment in total manufacturing exports, from 8 per cent in 1988 to Table 1. China's manufacturing exports and imports (SITC classi®cation), 1980±96. Sources: ZTN (1996, pp. 581±582); ZTZ (1997, p. 128). (a) 1980 (b) 1988 (c) 1996 (b)/(a) (c)/(b) Exports (US$100 m) Total merchandise (SITC 0±9) 181 475 1511 2.62 3.18 Total manufactures (SITC 5±8) 90 331 1291 3.68 3.90 Machinery and transport equipment (SITC 7) 8 28 353 3.50 12.61 Imports (US$100 m) Total merchandise 200 553 1388 2.77 2.51 Total manufactures 131 452 1134 3.45 2.51 Machinery and transport equipment 51 167 548 3.27 3.28 Exports±imports ratio Total merchandise 0.91 0.85 1.09 Total manufactures 0.69 0.73 1.14 Machinery and transport equipment 0.16 0.17 0.64 Notes: Strictly speaking, manufactures are de®ned as SITC (standard international trade categories) 5 to 8 less 68. But data of category 68 (non-ferrous metals) are not always available. Note that starting from 1992 items that were previously under category 9 (commodities not classi®ed elsewhere) have been re-classi®ed under the various categories from 0 to 8. Hence, there is some degree of non-comparability of data before and after that year. #1998 John Wiley & Sons, Ltd. J. Int. Dev. 10, 733±749 (1998) Machinery and China's Trade±Growth Nexus 735