Demystifying China’s Manufacturing Success by Zhang Jun

One might wonder how China has managed to reach the technological frontier in many sectors despite its low per capita GDP, and how it has kept the prices of the cutting-edge technologies it produces very low. In both cases, an important part of the answer is China’s massive scale.

SHANGHAI – Chinese manufacturing has come a long way – and by some measures, it is stronger than ever. Whereas foreign-invested enterprises were the driving force behind China’s manufacturing exports 20 years ago, most of these firms are now leaving China, having lost their market share to domestic competitors. And these dominant Chinese companies are not limited to the low-value-added production of the past. They are global leaders in many high-tech industries, such as semiconductors and electric vehicles, where they hold an absolute price advantage.