A test of dynamic comparative advantage hypothesis using panel data of the Chinese trade in medium-technology products

This paper examines the performance of the Chinese strategic trade policies, which are featured with active export promotion. We assume that the strength of strategic trade policies as well as the abilities of exports can be captured by “net export ratio”, and comparative advantages can be measured by “revealed symmetric comparative advantage” index. Using yearly SITC Rev.3 three-digit level panel data of 1992-2008, we find that for 27 process products and for all 71 medium technology products, the comparative advantages Granger cause the Chinese abilities of net exports; for 39 engineering products, there is a Granger causal relationship running from the abilities of net exports to the comparative advantages. We argue that the dynamic comparative advantages in the Chinese medium technology engineering products can be created by strategic export promotion, but the strategic trade policies perform poorly for process products and all medium technology as a whole.