Factor Endowments And Transformation Of China's Trade Structure,

In the beginning of reform and opening-up, comparative advantage theory significantly enhanced the Chinese trade and domestic economy. Based on the low cost labor and huge advantages of raw material junior products, China has increased its GDP and government revenue. Meanwhile, many unemployment problems have been solved as well. However, as the economic development in China; on one hand, comparative advantage theory gradually faced its bottleneck in guiding Chinese foreign trade. On the other hand, competitive advantage theory, whose core is innovation institution, showed its advantages increasingly. Therefore, which way should be taken during Chinese trade structure upgrade is the focus in economic researches. Some foreign trade industries always depend on comparative advantages; while the others gradually rely on self-competitive advantages instead of comparative ones. This paper will compare both types to demonstrate the necessity of developing competitive advantage gradually and point out the conditions and path of this trade structure upgrade.