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China is exporting more sophisticated products despite trade war

According to a new ranking, which predicts the Chinese economy will grow faster than India’s over the next decade.
Image: Qilai Shen/Bloomberg

The technological level of China’s exports increased through the trade war with the US, according to a new ranking, which predicts the Chinese economy will grow faster than India’s over the next decade.

China ranked 16th globally when judged by the complexity of its exports in 2019, moving up three places ahead of countries including Ireland since the onset of the trade war in 2018, according to a new study by Harvard University’s Growth Lab.

The index measures the diversity and technological sophistication of goods exported by a country as well as the volume of exports. The US ranked 11th, with the gap between the world’s two largest economies more than halving over the past decade.

The data show China was able to increase its ranking despite US tariffs by exporting to other regions, said Tim Cheston, senior research manager at the Growth Lab.

“There was an adept move by China to diversify its export destinations for electronics to Europe and elsewhere,” he said.

Data covering the coronavirus pandemic is not yet available, but it may have further boosted the country’s ranking due to a surge in China’s exports. The 2019 data was updated last week.

“There are signs that China will continue to gain market share in sectors because it was able to keep production going,” Cheston added.

A high ranking doesn’t guarantee fast economic growth: Japan has topped the ranking for 19 successive years, while posting sluggish growth. Rather, the gap between a country’s export sophistication and its current level of GDP per capita is the strongest predictor of a country’s future economic expansion, according to the Growth Lab.

China’s export performance contrasts with its almost equally populous but less well-off neighbour India, whose ranking in 2019 was 43rd despite the government’s “Make in India” push.

“In the past few years we’ve seen India fall off, its generally stagnated when it’s come to export development,” Cheston said. That suggests that when it comes to economic growth “China will outpace India over the next 10 years,” he said.

As China has moved ahead of more developed countries in the ranking, it faces greater challenges in maintaining its progress.

Chinese exports “are now at the level of having nearly filled all known areas of global products,” said Cheston. “China must now move from taking know-how from across the world into true innovation, that is going to be a major challenge.”

© 2021 Bloomberg

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