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Is China moving towards capital & technology intensive economy?

A recent research by Changjiang Securities reveals that with China's high-tech exports significantly improving, the internal structure of the computer and communication technology is relatively maturing forward along the areas of material and life technology products such as tilt, overall level of technology content of export products. High-tech products are the direct embodiment of China's technology intensive products, accounting for the proportion of China's exports rose rapidly from 17 per cent in 2001 to 31 per cent in 2009, since then remained relatively stable.

 

 

Is China moving towards capital technology intensive economy

 

A recent research by Changjiang Securities reveals that with China's high-tech exports significantly improving, the internal structure of the computer and communication technology is relatively maturing forward along the areas of material and life technology products such as tilt, overall level of technology content of export products. High-tech products are the direct embodiment of China's technology intensive products, accounting for the proportion of China's exports rose rapidly from 17 per cent in 2001 to 31 per cent in 2009, since then remained relatively stable. From the point of view of high-tech product structure, computer and communication technology account for 69 per cent of high-tech exports, and are in absolute dominant position. Since 2004, the export growth of computer and communications technology products has continued to decline, which has been a drag on high-tech exports. Without regard to computer and communication technology, other high-tech products (electronic technology, life science and technology, computer integrated technology and materials technology and other cutting-edge technology products) export share is still rapidly rising.

Disappearing working age population

Is China moving towards capital technology intensive

 

In recent years, the population structure changes, the labour age (15-59 years) population accounted for the trend of decline, labour intensive products exports rely on demographic dividend is gradually disappearing. At the beginning of the reform and opening up, China has achieved rapid economic growth in the past 30 years with a high population volume and population bonus, and a low labour cost advantage into the global division of labour system. In 2010, China's 15-59 year old working age population accounted for the highest value of 70.1 per cent, since then began to fall, while the proportion of elderly people aged over 60 has continued to rise. In stark contrast to China, the demographic dividend in India and Brazil is still strong. Compared with China, the age structure of the population in India is still ‘Pyramid’ shape, which means that the proportion of working age population will continue to rise.

Rising labour cost

With the change of population structure, the labour cost of our country is rising rapidly, and the rate of increase is much higher than that of other major manufacturing countries. The export comparative advantage of labour-intensive products is gradually weakened. In recent years, China's labour costs continue to rise, 2000-2015 years, the average annual per capita wage growth rate of 15.5 per cent, while the same period in Japan and South Korea labour costs increased by an average annual growth rate of -1.5 per cent and 1.2 per cent respectively. From the manufacturing labour cost point of view, in 1995-2015 years, China's manufacturing industry hourly labour costs rose 10 times, the same period India labour costs per hour rose only 1.4 times.

Growing emphasis on R&D

With the accumulation of knowledge and technological progress, China's labour productivity has improved rapidly, trade competitiveness has also been significantly improved, further driving the export structure upgrading. Through the above research, it was found that the structure of China's export products has been continuously upgraded, and the focus has shifted from labour intensive to capital and technology intensive products. Over the past ten years, the proportion of export of labour-intensive products has declined markedly, and the proportion of capital and technology intensive products has risen rapidly. The proportion of labour intensive exports has dropped, which is closely related to the gradual change in population structure and the end of the ‘demographic dividend’ sweet period. With the change of population structure, the cost of labour force (especially the low-end labour force) increases rapidly, which further weakens the export advantage of labour-intensive products.

What lies ahead?

The export of China's capital and competitive advantage of technology continues to improve, such as ship and railway vehicle competitive advantages remain stable, basic metal miscellaneous products, chemical fiber, iron and steel products, aluminum products, machinery and other competitive advantages growing. While the labour advantage has been weakened, the competitive advantage of capital and technology intensive products has been improved as a whole. Sub-industry, ship and railway vehicle competitive advantages remain solid, chemical fibre, chemical fibre filament, iron and steel products, aluminum products, mechanical and electrical trade and strengthen its competitive advantage, competitive advantage is to accelerate development of optical equipment. With the recent gradual warming of foreign demand, exports of ships, basic metals, miscellaneous products, railway vehicles and other industries with strong trade competitive advantages have been significantly restored, and the approximate rate will continue.

 
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