China’s Integration with the World: Development as a Process of Learning, Augmenting and Upgrading

Development is a process that is full of uncertainties, and even more so is the process of transition from the planned economy to a market oriented one. Because of the uncertainties and country specificity, development must be a process of learning, selective adaptation, and augmentation and upgrade. This paper attempts to distill lessons from China’s reform and opening up process, and to investigate the underlying reasons behind China’s success in trade expansion and economic growth. Started with home-grown and second best institutions, China has embarked on a long journey of reform, experimentation, and learning by doing, transforming from the Comparative Advantage-Defying (CAD) strategy to the Comparative AdvantageFollowing (CAF) strategy. Further, China is catching up quickly through augmenting its factor endowments and upgrading industries; but this has been only partially successful. Even though China is facing several difficult challenges including rising inequality, an industrial structure that is overly capitaland energy-intensive, and related environmental degradation, it is better positioned to tackle them now than thirty years ago. This paper reviews the drivers behind China’s learning and trade integration and provides both positive and negative lessons to developing countries with diverse natural endowments, especially those in Sub-Saharan Africa. JEL No. F13, F14, O50, O53