Comparative Advantage, Exchange Rate and Exports in China

Based on revealed comparative advantage indices, the patterns of China's exports are studied empirically at not only national level but also provincial level. The statistic results have demonstrated that China has changed its export strategy to coincide with the law of comparative advantage. However, there is a distinct difference in export patterns between the coastal region and the interior region, which may partly explain the divergence in the growth rate of GDP or income between them. In addition, econometric estimates of export equations provide evidence the real effective exchange rate, comparative advantage strategy as well as domestic supply and foreign demand have theory-expected impacts on export, which also show market force is playing a more important role in China's exports.