ABSTRACT
This chapter utilizes total factor productivity (TFP) to measure the performance of large Chinese firms in 2001–2008. The upgrading of China’s manufacturing value chain that has resulted from integration with world markets has rich policy implications. The chapter describes the performance of the Chinese manufacturing sector, including total manufacturing products and manufacturing exports. It estimates and measures China’s TFP growth in manufacturing sectors using firm-level data and a semi-parametric approach. China’s contemporary reform-era export-oriented development strategy was inspired by the successful experience of growth model in other Asian emerging economies, including Hong Kong, South Korea, Taiwan, and Singapore. The chapter reviews the fundamental economic theory to understand China’s value-chain upgrading, and discusses the policies that are needed to ensure the competitiveness of manufacturing in the future and avoid the middle-income trap.
