Research On Revealed Comparative Advantage Of Chinese Mechanism Products

Since 1990s, Chinese economy has been developing very fast. At the same time its value of export increased dramatically and the share of mechanism industry had grown from 15.54 percent in 1992 to 47.20 percent in 2008, average increasing speed being 32 percent per year. According to the theory of comparative advantage, the large-scale export of mechanism industry means that the comparative advantage of China in the industry has increased a lot. The result of the index of revealed comparative advantage (RCA) which is used to measure comparative advantage widely in the world has verified it, too. At the same time, the paper notices that it is able to decompound RCA from two aspects so as to analyze the source of variation of RCA quantitatively. In addition, RCA is an index who studies afterwards and reckons the previous comparative advantage from the export which had happened. However, export could be affected by many factors such as the factor endowment, policies of the export country and the demand of the import country and so on. For example, behind the large-scale export of Chinese mechanism industry there is large-scale of foreign capital and processing trade. Therefore, the specialization status of china in mechanism industry needs studying. The paper attempts to utilize RCA and the more advanced normalized RCA (NRCA) to analyze Chinese mechanism industry, making every effort to verify the true level of its comparative advantage and discover its international specialization status to provide references for future development.This paper is divided into six parts with the main themes of each part as follows:The first part is introduction including the background, values, related concepts, innovations and difficulties. The second part focuses on the theory study and literature review. It reviews the development of theory of comparative advantage and provides the theoretic basis for the paper. Then the literature review contains abroad and home parts, focusing on the literatures using RCA and summarizing the merits and shorts. The third part brings forward the main methodology including index of Balassa revealed comparative advantage (BRCA), index of Normalized revealed comparative advantage (NRCA) and the process of decomposition of BRCA. Then it comes to the main parts that are the forth and fifth one. On the one hand the forth part studies the comparative advantage of SITC7 (the mechanism industry) as a whole, calculating the RCA and NRCA between China and other six selected economies and analyzing its changes; On the other hand, it measures the drive factors of changes of RCA from a quantitative aspect through decompounding RCA from two aspects. Verifying this helps to make it clear as how to improve its comparative advantage. The fifth part considers factors which influence forming of comparative advantage of Chinese mechanism industry to explain and rectify the results concluded form the forth part. Then the last part confirms the international specialization status of Chinese mechanism industry and provides suggestions to the problems discovered.According to the analysis, except USA, comparative advantage of Chinese mechanism industry has more or less improved compared to Japan, Germany, Brazil, India and Russia. However, the paper doesn't find that the comparative advantage is evidently larger compared to developing countries than developed countries. The products that have comparative advantage are different between the two developing levels, too. At the same time its decompounded results reveal that part of the improvement compared to Japan attributes to decreasing of Chinese compared national comparative advantage which means lost of benefits for China. When analyzing the influencing factors of comparative advantage, the paper finds that low labor cost, foreign capital, processing trade, environment and even policy play very important roles in the mechanism industry export. Considering all of these factors the result of RCA of the industry would decline a big amount. Still there are some small underling industries made big progress in technique. Therefore, we should implement different stratagems according to different underling industries.