The Chinese challenge in electronics

Chinese exports of "electronic and information technology products" have grown rapidly, from under $20 billion in 1995 to over $140 billion in 2003. 

Does this growth "constitute evidence that China is leapfrogging ahead technologically," perhaps due to a "government industrial policy" of "high tech mercantilism"?  Is this "a major challenge to US commercial and security interests"? 

Nicholas Lardy, of the Institute for International Economics, doesn't think so.

First of all, while its true that Chinese exports of electronics have grown enormously in the last 10 years, these aren't generally what you'd think of as high tech.  They're mainly exporting things like "DVD players, notebook computers, and mobile telephones."

Moreover, they're importing most of the components for these.  "While China exported $142 billion in electronic and information technology products in 2003, China's imports of these products, overwhelmingly parts and components rather than finished goods, were over $128 billion."  China is assembling products from parts imported from elsewhere.

Finally, most Chinese production is generated by "foreign firms that are using China as an export platform...Taiwanese firms that have relocated to the mainland dominate the production of electronic and information technology products that are exported from China...In 2003, for example, foreign firms accounted for 92 percent of China's $41 billion in exports of computers, components, and peripherals and 74 percent of China's $89 billion in exports of electronics and telecommunications equipment..." 

Source: Nicholas R. Lardy, "China: The Great New Economic Challenge?"  (pages 131-134) in The United States and the World Economy, edited by C. Fred Bergsten (Institute for International Economics, 2005).  You can read Lardy's essay online, but you can't print it out.

Comments

[dryfly]

2003 was a long time ago in the equivalent of 'computer years'... similar time scale as 'dog years' but even shorter... I can tell you from my own business contacts that the component build is way up in China... wafer fab, disk drives, packaged IC's - the whole deal. In fact I would guess that as of now (start Q2 05) China is exporting more components than importing.

Secondly it is not going to be a 'surprise' where China goes in the next couple years as their last 'Five Year Plan' is just ending... 2001-2005. They post a summary of them on 'China Daily'...
The summary for Telecomm & IT is at:

The Tenth Five-Year Plan of the Telecom Industry

We won't know what kind of a threat they will be until the next one is out... Regardless of whether you approve or don't approve of 'planned economies'... The fact is China has the resources (foreign exchange reserves) and market activeness (to draw additional outside investment) that if they make this 'part of their plan'... they will be a threat.

Make no mistake about it.