Estimation And Analysis Of China's Export Product Quality

Export product quality is an index which can reflex a country's export level in a more persuasive way. In today's international economy, it is no more how many products one country exports that matters, but what products it exports and to what extent they are accepted by the global market. Under export-oriented policy, China has witnessed a dramatic growth in its international trade volume. But what lays the foundation for the future sustainable development is not the expansion of export, but of quality.Based on the Product Quality Index model proposed by Hallak and Schott (2009), this paper estimates China and other nine countries'quality index of SITC7 products between year 1990 to 2006, including telecommunication, transportation and electronic equipment, etc. It finds out that during this 17 years, China's export products in this section exhibits an obvious growing trend. It surpassed India and Korea in 2002 and 2006, ranking the 7th place of all the ten countries. But that estimation does not exclude the processing trade, which consists of a high proportion of China's export, especially within high-tech products. So in the second part of the estimation, this paper adjusts the model with this factor included. It turns out that after excluding the processing trade, the quality of China's SITC7 products was lower than that of the previous estimation during year 1990 to 2000, but exceeded it in 2001 and kept growing in the following years. This result can explain two main things. One is that the processing trade and thus, foreign direct investment have a great influence on China's export products. What the world thinks about the recent increase in China's export sophistication in fact largely depends on the intermediary products from the processing sector. Two is that domestic enterprises are able to make use of the spillover effect to innovate and research on their own, so to export authentic domestic products.Therefore, if China wants to realize a sustainable growth in the future, it has to upgrade the processing trade. And also, China needs to develop the competitiveness of its own industry, making rational use and reducing the reliance on foreign investment, so to achieve the real advancement in the quality of the export products.