The Relative Sophistication of Chinese Exports∗
Peter K. Schott†
Yale School of Management & NBER
First Version: October 2004
This Version: March 2007
Abstract
This paper examines the relative “sophistication” of China’s exports to the United
States across and within product markets. First, I analyze how the set of products China
exports to the United States compares with that of the OECD. Second, I examine Chinese
export prices relative to OECD export prices within product markets. Across products,
I find China’s export overlap with the OECD to be much greater than one would predict
given its size and relative level of development. Within product markets, however, I show
that Chinese varieties are priced lower than OECD varieties, and that the Chinese relative
price is falling over time in some industries. These results suggest that OECD countries
may be adapting to competition from low-wage countries like China by moving up the
quality ladder. Policies in developed economies that facilitate the relocation of workers
from comparative-disadvantage to comparative-advantage industries will aid in distributing
the welfare gains from trade associated with trade liberalization.
Keywords: Chinese exports; Product Trade; Export Unit Values
JEL classification: F1; F2; F4
∗I gratefully acknowledge financial support from the National Science Foundation (SES-0241474).
I also thank Keith Chen, Amit Khandelwal, Philippe Martin, members of the 2004 NBER China
Working Group and two anonymous referees for helpful comments, suggestions and insights.
†135 Prospect Street, New Haven, CT 06520, tel : (203) 436-4260, fax : (203) 432-6974, email:
peter.schott@yale.edu
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1.
Introduction
Speculation about the impact Chinese growth will have on developed and devel-
oping countries over the coming decade varies widely. Some observers predict the
imminent end of manufacturing in developed economies like the United States and
Europe, while others believe low- and middle-income countries are the