Is China climbing up the quality ladder? Estimating cross country differences in product quality using Eurostat's COMEXT trade database

There is an ongoing debate in the literature about the quality content of Chinese exports and to what extent China imposes a threat to the market positions of advanced economies. While China’s export structure is very similar to that of the advanced world, its export unit values are well below the level of developed economies. Building on the assumption that unit values reflect quality the prevailing view of the literature is that China exports low quality varieties of the same products than its advanced competitors. This paper challenges this view by relaxing the assumption that unit values reflect quality. We derive the quality of Chinese exports to the European Union by estimating disaggregated demand functions from a discrete choice model. The paper has two major findings. First, China’s share on the European Union market is larger than would be justified by its relatively low average prices, implying that the quality of Chinese export products is relatively high compared to many competitors. Second, China has gained quality relative to other competitors since 1995, indicating that China is climbing up the quality ladder. The relatively high and improving quality of China’s exports may be explained by the increasing role of global production networks in China. JEL Classification: F1, F12, F14, F15, F23Chinese Exports, COMEXT database, Discrete Choice Model, Global Production Networks, Quality Ladder, Vertical Product Differentiation

Has emerging Asia decoupled? An analysis of production and trade linkages using the Asian international input-output table

Due to the emergence of global production networks, trade statistics have became less accurate in describing the dependence of emerging Asia on external demand. This paper analyses, using an update of the Asian International Input-Output (AIO) table, the interdependence of emerging Asian countries, the United States, the EU15, and Japan via trade and production linkages. According to the results, we do not find evidence of the decoupling of emerging Asia from the rest of the world. On the contrary, we find evidence on increasing trade integration, both globally and regionally. Nonetheless, our analysis indicates that emerging Asia’s dependence on exports is only about one-third of its GDP, i.e. well below the 50% exposure suggested by trade data. This finding can be explained by the high import content of exports in these economies, which is a result of the increasing segmentation of production across the region. JEL Classification: F14, C67, E23Asian International Input-Output table, decoupling, Emerging Asia, real linkages, resilience

Is China climbing up the quality ladder?

There is an ongoing debate in the literature about the quality content of Chinese exports and to what extent China poses a threat to the market positions of advanced economies. While China’s export structure is very similar to that of the advanced world, its export unit values are well below the level of developed economies. Building on the assumption that unit values reflect quality, the prevailing view of the literature is that China exports low quality varieties of the same products as its advanced competitors. This paper challenges this view by relaxing the assumption that unit values reflect quality. We derive the quality of Chinese exports to the European Union by estimating disaggregated demand functions from a discrete choice model. The paper has three major findings. First, China’s share of the European Union market is larger than would be justified only by its low average prices, implying that the quality of Chinese exports is high compared to many competitors. Second, China has gained quality relative to other competitors since 1995, indicating that China is climbing up the quality ladder. Finally, our analysis of the supply side determinants reveals that the relatively high quality of Chinese exports is related to processing trade and the increasing role of global production networks in ChinaLa calidadde las exportaciones chinas y hasta qué punto pueden ser una amenaza a las posiciones de mercado de las economías avanzadas es un debate abierto en la literatura. Si bien la estructura de las exportaciones de China es similar a la de los países avanzados, sus valores unitarios son muy inferiores. Basándose en el supuesto de que los valores unitarios reflejan la calidad de las exportaciones, la corriente predominante en la literatura es que China exporta las variedades de baja calidad de los mismos productos que exportan las economías avanzadas. Este trabajo cuestiona esta hipótesis al relajar el supuesto de que los valores unitarios sean una medida de la calidad. La calidad de las exportaciones chinas a la UE se obtiene a través de las funciones desagregadas de demanda derivadas de un modelo de elección discreta. Nuestro análisis obtiene tres resultados principales. En primer lugar, la cuota de mercado de China en la UE es mayor de la que sólo se justificaría por sus precios bajos, lo que implica que la calidad de las exportaciones chinas es relativamente alta respecto a muchos competidores. En segundo lugar, China ha aumentado la calidad relativa de sus exportaciones en relación con otros competidores desde 1995. Finalmente, el análisis sobre los determinantes de oferta de la calidad de las exportaciones chinas revela su relación con el comercio de procesamiento y ensamblaje y, por tanto, con el papel creciente de las redes mundiales de producció

Imports and profitability in the euro area manufacturing sector: the role of emerging market economies

The paper analyses the impact of import penetration on firms’ profitability in 15 manufacturing industries in 10 euro area countries during 1995-2004, focusing on the role of emerging market economies. Our results indicate that import competition from emerging market economies has had an overall negative impact on companies’ profitability in the euro area manufacturing sector, especially for imports coming from China and Russia. However, similar negative effects are also estimated for imports from the United States. In contrast, imports from Latin America are estimated to be positively correlated with profitability. Finally, we find asymmetric effects on profitability across euro area countries and sectors. JEL Classification: L11, L13, F12, C23emerging markets, euro area, Globalisation, import penetration, Profitability

China's economic growth and rebalancing

Incluye bibliografíaIn this paper we provide an overview of the growth model in China and its prospects, taking a medium-run to long-run perspective. Our main conclusions are as follows. First, the still prevailing producer-biased model of managed capitalism in China tends to engender, as an inherent byproduct, serious imbalances which cannot be unwound without a fundamental overhaul of the model itself. Second, given the lack of a critical mass of economic reforms thus far, imbalances may (re-)escalate once global and domestic economic conditions normalise. Third, the fundamental factors underpinning growth in China are likely to remain supportive, at least over the medium run. Although this could help mitigate the economic costs of imbalances for some time to come, it could also reduce the incentives for policymakers to enact much needed reforms. Fourth, delayed policy action and the persistence of the model of growth cum imbalances would increase the risk of China getting caught in the middle-income trap in the long run. Greater political will to redirect China’s growth model towards a more sustainable path is therefore neede