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China'S Integration With The World: Development As A Process Of Learning And Industrial Upgrading

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  • JUSTIN YIFU LIN

    (World Bank, USA)

  • YAN WANG

    (World Bank, USA)

Abstract

Development is a process that is full of uncertainties, and even more so is the process of economic transition. Because of uncertainties and country specificity, development must be a process of learning, selective adaptation, and industrial upgrading. This paper attempts to distill lessons from China's reform and opening up process and investigate the underlying reasons behind China's success in trade integration and economic growth. From its beginnings with home-grown and second-best institutions, China has embarked on a long journey of reform, experimentation, and learning by doing. It is moving from a comparative advantage-defying strategy to a comparative advantage-following strategy. The country is catching up quickly through augmenting its factor endowments and upgrading industries; but this has been only partially successful. Although China is facing several difficult challenges — including rising inequality, an industrial structure that is overly capital- and energy-intensive, and related environmental degradation — it is better positioned to tackle them now than it was 30 years ago. This paper reviews the drivers behind China's learning and trade integration and provides both positive and negative lessons for developing countries with diverse natural endowments, especially those in Sub-Saharan Africa.

Suggested Citation

  • Justin Yifu Lin & Yan Wang, 2012. "China'S Integration With The World: Development As A Process Of Learning And Industrial Upgrading," China Economic Policy Review (CEPR), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 1-33.
    • Handle: RePEc:wsi:ceprxx:v:01:y:2012:i:01:n:s179396901250001x
    DOI: 10.1142/S179396901250001X
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    References listed on IDEAS

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    Cited by:

    1. Giorgio Prodi & Federico Frattini & Francesco Nicolli, 2018. "The diffusion and embeddedness of innovative activities in China," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 71-106, April.
    2. Giorgio Prodi & Francesco Nicolli & Federico Frattini, 2017. "State restructuring and subnational innovation spaces across Chinese prefectures," Environment and Planning C, , vol. 35(1), pages 94-112, February.

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