Creating Comparative Advantage

Here is an interesting piece from the Financial Times on how Chinese companies are rapidly grabbing global market share from Germany of all countries across a swath of technologically sophisticated capital goods industries, from solar, to high speed rail, to the German fortress of mechanical engineering and machine tools.

Had China heeded the mainstream view that its comparative advantage lay in labour intensive consumer products – toys and clothing  and the like – none of this would happened.

Instead, it has pursued activist trade and industrial policies to build sophisticated productive capacities. These are, of course, still a small part of the overall Chinese economy. But, China is now a very big economy indeed.

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