Are China's exports really so special?

Yesterday's post, What's so special about China's exports?, cited a new paper by Dani Rodrik which argued that "China is exporting stuff that is way too sophisticated for its level of income, and that explains part of its success". It's an interesting argument. But is Rodrik right?

A recent paper by Sanjaya Lall (RIP), John Weiss and Jinkang Zhang, entitled The ‘Sophistication’ of Exports: A New Measure of Product Characteristics, suggests that his claims may be exaggerated. This paper proposes:

...a new classification - ‘sophistication’ - as a means of analyzing product characteristics in great detail, based on the average income of exporting economies. Sophistication captures more than technical characteristics; it includes product differentiation, production fragmentation, resource availability and other factors. However, it has the advantage of providing unique continuous scores for each product at any level of detail. We calculate sophistication scores for 237 exports at the 3-digit SITC level and 766 exports at the 4-digit level for 1990 and 2000...

Table 6 in the discussion paper, which ranks country export sophistication, locates China in 2000 with a sophistication index close to those of Chile, Indonesia, Egypt and India.

Figure 2 shows the divergence between actual and predicted sophistication scores in relation to income. Though it shows that China's actual export sophistication is higher than expected from its income levels in both 1990 and 2000, the divergence was not especially big in 1990 - and had halved by 2000. Moreover, many other countries showed a much greater positive divergence in export sophistication. Ireland lead the list in 2000. Also doing better than China were Mexico, the Phillippines, Brazil, Malaysia, Korea, South Africa, Thailand, Costa Rica, Argentina, Taiwan, Germany, the UK and Finland.

If one used purchasing power parity-adjusted per capita income levels the rankings would be somewhat different, but even so, this is hardly a stellar performance.

Note: A shorter version of this paper has just been published as The “sophistication” of exports: A new trade measure in World Development, February 2006.

Comments

[Guest]

I suspect in Germany's case this is caused by the fact that while those workers that are employed create high value products there are many unemployed, thus lowering the average income level. Ie if somehow those unemployed people vanished Germany's income per capita would be higher (obviously).

Maybe one needs to seperate China into different regions. I suspect the export sophistication is closer to the expected level in the coastal areas (those that actually produce export goods).