These products largely consisted of footwear, textiles and clothing, toys, travel goods and sporting goods. China’s involvement in the assembly of technology intensive products such as telecommunication equipment and computers started increasing during the early 2000s. Recently, substantial expansions have been made in exports of more sophisticated electronics such as office machines and automated data processing equipment and other industrial supplies.

According to Rumbagh and Blancher, the shift in favour of technology intensive products became evident from the rising shares of exports of machinery and transport equipment including electronics. While such exports accounted for only 17 per cent in 1993, these reached 41 per cent in 2003. The share of miscellaneous manufacturing declined from 42 per cent to 28 per cent during the same period.

The items of a country’s export basket may be segregated based on a mix of five factors:

1. Skill: Levels attempt to group industries on the basis of their requirements of skilled or unskilled manpower,

2. Scale of production: Refers to the large, medium or small size companies,

3. Resource/endowment: Attempts to differentiate the more capital intensive industries from the less capital-intensive ones or more labour intensive industries from the less labour intensive ones,

4. Technology content: Primarily used to assess the quality of exports in the low, medium or high technology segments by accounting for the direct and indirect technology content of such exports,

5. Stage of production: Distinguishes the items by their use between raw materials, semi-finished or finished items.

The analysis shows that during 2001-2006, the share of high tech products is 32 per cent of China’s total exports and 43 per cent of total imports. This is indicative of the fact that imports of high-tech parts and components are assembled in China to be exported as finished high tech goods. Imports of high tech products are sourced mainly from NIES-4, Japan and ASEAN-4 and exported mainly to the developed world. Even in the case of low and medium technology intensive products their share in China’s imports at 18 per cent is higher than that of their exports at 15 per cent. In the case of unskilled labour intensive products there is a 26 per cent share in China’s exports but only 3 per cent in China’s imports. The share of low and medium human capital intensive products is 12 per cent in China’s exports but only 8.3 per cent in China’s imports. The corresponding numbers are 5 per cent and 1 per cent, respectively in the case of high human capital intensive products.

Alongside exporting primary commodities and unskilled labour intensive products and natural resource intensive products, China has considerably increased and diversified its export basket by exporting more technology intensive products and also human capital intensive products. But the interesting observation from the study is that this shift is a conscious effort on the part of China to export high tech commodities to its major trading partners. Although the skill content of China’s exports has increased, this does not necessarily mean that there has been any skill upgrading in China’s production techniques. Instead, China has been importing intermediate inputs with higher skill content that it then assembles for exporting which several studies in recent times have reported.  Based on the competitiveness analysis, the share of high-tech manufactures has increased while the share of unskilled labour intensive products has gone down during 2001-2006.

Geethanjali Nataraj and Anjali Tandon are Fellow and Associate Fellow at NCAER, respectively.