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ore recent theories (Gross man
7and E. Helpman 1989, and Hausmann, Hwang and Rodrik, 2005) indicate that developing
nations would tend to imitate those high technology products used to be produced by developed nations and recent speed that China restructured its export products and upgraded its variety of products have been witnessed. Gereffi (2005) reckons that industrial upgrading is an important process whereby each economic players, either nations, firms or workers, will migrate
9from low-value to relatively high value activities in the global production
value chain. The control over trading activities as well as currency manipulation in contemporary China can also be found in the rise of East Asian miracles i.e. the success of Korea, Taiwan, Hong Kong and China whereby the markets and states played an important role in promoting export-oriented industrialization in these regions (Feenstra and Hamilton, 2006). Post China's economic reforms in 1978, international trade has formed a sizable portion of the country's GDP. China's
16exports, as a percentage of its GDP, rose consistently from
8% in 1982 to 38.4% in 2007, while its imports increased from 6.4% to 29.6% over the same period. The last time China recorded a trade deficit was way back in the late 1980s. Since then, China has been recording a trade surplus every year (except in 1993). Chart 1 given below shows the gap between China's exports and imports (referred to as "Net Exports"), which began widening in the 1990s and reached a peak of 8.8% of the GDP in 2007. Chart 1: Exports, Imports, as a percentage of GDP Source: CEIC Database The cheap labour compensation attributes a lot to China's export success, along with its manually manipulated devaluation of its currency. The Chart 2 below shows that compensation (% of GDP) in some of China's major provinces. Compensation of employees in Guangdong, a coastal province well known for its low-labour-cost manufacturing plants , declined
14from 55. 6% in 1993 to 45 .5% in 2000 and further to
38.8% in 2007. Chart 2: Compensation of Employees in China & its Major Provinces (% of GDP) Source: CEIC Database The global financial crisis in 2008-2009 led to the growth in China's exports moderating to 7.7% in 2008 and declining 17% in 2009, as against a strong growth of over 20% in each of the previous six years. Consequently, China's net exports' share declined from its peak of 8.8% of the nation's GDP in 2007 to 3.8% in 2009. Prior to 2008, China's low wages primarily drove the surge in the country's low-cost exports. However, the declining share of China's rural population and falling compensation of employees, as percentage of GDP, in the past decade, coupled with the labour unrest in 2010,
17has made it difficult for producers to
continue benefiting from the region's cheap labour, which could
12lead to an increase in the cost of Chinese labour, which
could
13lead to an increase in the cost of Chinese products. Hence, though the decline in
https://www.51lunwen.org/TurnitinPlagiarism/ China's net exports in the last two years (2008-2009) has been cyclical, there could be a structural decline in the next few years. This could be compensated by the increasing in its private consumption, as the authorities have been making efforts to slow down the investment-led growth that is being fuelled by credit. Export Recovery in December 2009 A mile stone for