Industrialization in China

Abstract This chapter views industrial growth in China over the last 150 years as an ongoing process through which firms acquired and deepened manufacturing capabilities. Two factors have been consistently important: openness to the international economy and domestic market liberalization. For a latecomer like China, modern industry initially has greatest success in more labour-intensive products requiring only modest capabilities. Gradual upgrading entails the shift into more skilled-labour and capital-intensive products and processes. Our construction and review of long-term data shows that (i) China’s industrial growth rate consistently exceeded that of Japan, India, and Russia/USSR throughout most of the twentieth century; (ii) China’s shift from textiles and other light industry toward defence-related industries began before rather than after 1949, as did the geographic spread of industry; and (iii) the state sector has consistently been a brake on industrial upgrading, highlighting the significance of current reform initiatives in determining China’s future industrial path.