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View all search resultsDemystifying China’s manufacturing success
The vast expanse that is China is a significant part of how it achieved technological success at such low prices, but this achievement is also linked to the delivery of high-quality education, encouragement of local-foreign ventures as well as the nurture of horizontal domestic competition.
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A welder works on July 15, 2025, at a steel structure fabrication factory in Hangzhou, Zhejiang province, East China. (AFP/-)
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hinese 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.
Today’s China is reminiscent of Japan and South Korea in their heydays. In the 1970s, Japan was producing high-tech products that outperformed American alternatives, including home appliances and automobiles. And in the 1990s, South Korea emerged as a powerhouse in the electronics and automobile industries.
The difference is that the per capita gross domestic product of 1970s Japan and 1990s South Korea was approaching half that of the United States, but China’s per capita GDP today, in nominal terms, amounts to less than 16 percent of America’s: US$13,300 compared to $85,800.
The obvious question is how a country with such low per capita GDP has managed to reach the technological frontier in so many sectors. Another, perhaps more interesting, question is how China manages to keep the prices of the cutting-edge technologies it produces so low.
In both cases, an important part of the answer is China’s massive scale.
If a country with a huge population can deliver high-quality education to its people, it will eventually accumulate disproportionate human capital. Such a country will learn more readily from advanced economies and develop its own innovative capacity earlier in its development.
