Trade Structure: PRC and the Region

In general terms it is well known that PRC's trade and production structure is intermediate; less sophisticated than Japan and the first tier newly industrialized economies (NIEs) (Singapore, the Republic of Korea, Taipei,China), but in some sectors considerably more sophisticated than that of the second tier NIEs (Indonesia, Malaysia, Thailand and the Philippines). This can be illustrated in various ways.

The simplest approach is to compare the structure of exports by trade category. Table 1 [PDF 49kb | 1 page] reports the correlation coefficient between shares for 3 digit SITC categories for two years 1990 (when PRC was still a relatively closed economy) and 2000. It can be seen that in 2000 PRC's export structure was relatively similar to that of Taipei, China, and to a lesser extent the Republic of Korea, ten years earlier. Making the comparison for 2000 PRC's structure is closest to that of Taipei,China and Thailand (correlation coefficients of over 0.5) and most dissimilar from that of Indonesia and the Philippines (correlation coefficients of around 0.3).

An alternative way of looking at the same data is to draw on a well-established trade classification that groups SITC categories by the technological sophistication of the products they cover based on the R and D intensity and use of natural resource of the products (see Lall 2000 for details). The significance of this means of grouping the data is that more technologically sophisticated products (principally in the high technology category) in general tend to have higher value-added per unit of export and to show the greatest market growth in world trade; in other words the high technology category captures the most dynamic segment of world trade.

Table 2 [PDF 50kb | 1 page] classifies PRC and regional trade in 2000 by this technology grouping. Over the period 1990-2000, PRC's total export growth was considerably faster in the high technology category (averaging 32% annually as compared with 17% for all manufactures). Whilst PRC's growth in the high technology category (principally electronics) has been impressive, in terms of share in total manufactures it still remains well below most regional partners, with the exception of Indonesia. The importance of low technology goods in 2000 reflects the continued role of clothing and textile products based on low wage costs. This significant role is expected to continue at least in the short term with the removal of the export quota system for these goods in 2005, from which PRC is expected to be the main beneficiary.

There is no simple formula for determining the degree of potential complementarity between economies, but given these differences in trade structure and the differences in domestic production that underlie them, prima facie there seems clear scope for a re-orientation of trade in the different economies in response to the opportunities created by closer trade integration and liberalization. As we shall see, there is in fact evidence of this occurring at an accelerated pace, particularly through the segmentation of production chains in the high technology (particularly electronics) branches.

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