The Workshop of the World

The chapter describes the rapid growth of Chinese manufacturing since 1979, and its increasing share of global industrial output. The chapter analyses the factors that have made the manufacturing sector so competitive internationally, considering the role of wages and productivity, economies of scale and scope, the exchange rate and government subsidies. It highlights several characteristics of China’s manufactured exports, including the significant role played by foreign firms, the high levels of import content (although this has been declining over time), and technological upgrading. These characteristics reflect the integration of China into a regional production network in East Asia. The chapter concludes with a discussion of the ways in which China’s expansion has helped reduce the prices of manufactured goods and has affected the manufacturing production and exports of other countries.