China’s technological rise and its global welfare effects

Abstract

This paper examines how China’s technological progress has evolved since 1979 and its impact on global welfare. Using a multi-country Ricardian trade model and data from the 50 largest economies, we estimate China’s technological trajectory over time. Although China still trails world leaders such as the United States, it has substantially closed the gap with advanced economies. Counterfactual analysis shows that had China’s technology remained at its WTO accession level, global trade gains would be 3.47% lower. Conversely, a 2.5% reduction in trade costs under the Belt and Road Initiative could raise welfare gains from China’s progress by 2.92%. Projections suggest that continued upgrading, together with China’s economic scale, will further shape global trade outcomes. The results highlight both the opportunities and challenges China’s technological trajectory poses for the world economy.