China Manufacturing From Comparative Advantage To Competitive Advantage

Manufacturing provides a solid foundation for competence and industrialization of a country. China, in her process of industrialization, needs this backbone of development more eagerly. Since the Founding of new China, manufacturing has been constantly developing and gained great success under the guidance of The Comparative Advantage Theories. China, as a developing country, has the advantage in labor resources and labor intensive industry over other developed countries'. Thus China benefits a lot from her diligent investment in labor intensive industries which have been china's leading export industries, such as textile, clothing, shoemaking, furnishings and plastic.However, this Chinese-style comparative advantage in manufacturing appears more and more inadaptable under the force of emerging knowledge economy and economic globalization. The traditional comparative advantage is declining and trade terms are worsening. The localization effect is weakening and technology is progressing slowly. The real reason is that static interest from source gift is overstressed and the dynamic trading interest is neglected such as the adjustment of industrial framework, technology progress and system innovation.The Competitive Advantage Theory was proposed by American economist Michael Porter in 1980s. This theory stresses that one country's dynamic advantages and subjective initiative in obtaining the competitive advantages. The competitive advantages can not be succeeded or fixed, but acquired through innovation mechanism and active competition. Its emphasis is put on the non-price competition, the quality of productive factors and demanding levels of target markets. Government functions are also taken into the consideration to create a fair competing environment for the promotion of products' quality and international competing power.The Competitive Advantage Theory is China's natural and necessary choice to guide her manufacturing. China's transformation from comparative advantage to competitive one accords with her economic development law. In this thesis, firstly, the author analyzes status quo of China's manufacturing and researches the comparative advantage of manufacturing. Using the Trade Competition Index to do some quantitative analysis about China's manufacturing comparative advantage, the author finds that comparative advantage exists in labor intensive industries. Thereafter, the author analyzes China's manufacturing competitive...