Edited by Takatoshi Ito and Chin Hee Hahn
Chapter 10: East Asian Production Networks and the Rise of China
10. East Asian production networks and the rise of China* Fukunari Kimura RISE OF CHINA AS AN INTERNATIONAL PLAYER 10.1 The growth performance of China has truly been remarkable. With its massive size, China has continuously attained 10 percent plus growth rates for years. Although some scholars predict a number of risks and challenges that China may face, the existence of vigorous economic dynamism is obvious. Furthermore, the Chinese economy has actually become increasingly open and international, though the splendid growth of China’s domestic economy often overshadows it. China’s international trade has grown much faster than its gross domestic product (GDP). In other words, in the analogy of astrophysics, the Chinese economy is not collapsing by its own gravity like a white dwarf star but is expanding its size just like a reddish giant star. We have observed the unprecedented development of international production networks in East Asia since the beginning of the 1990s, particularly in machinery industries (Ando and Kimura 2005; Kimura 2006). China has increasingly become an important participant in such networks. China is a ‘lumpy’ country (Courant and Deardorff 1992) in the sense that factor prices and location advantages across regions within the country differ widely and present a variety of comparative advantages at the same time. The lumpiness pulls down the proportion of machinery trade in China to some extent. However, the absolute magnitude of transactions in machinery industries has recently grown at an explosive pace. China has quickly become a focal point of production networks...
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