Technological structure and its upgrading in China's exports

Based on several indexes, this article investigates technological upgrading in China's exports. It demonstrates that the whole technological contents of China's exports have been improved dramatically since the early 1980s. In the meantime, the domestic technological contents are likely experiencing a V-curve, i.e. decreasing first and then increasing later. Native enterprises grow faster than their foreign direct investment (FDI) counterparts through 'learning-by-doing', and the gap between them is narrowing. It is shown that China's exports have adopted a limited catch-up strategy rather than solely following its comparative advantage. Under the limited catch-up strategy, China exports products with technological contents higher than what was predicted by its comparative advantage. In addition, the experience of South Korea and Taiwan as well as cross-country comparison demonstrates that adopting a limited catch-up strategy is conducive to economic development. We argue that this is what is taking place in China.