Chinese Electronics Export; Taiwanese Contract Manufacturing – The Win–Win Outcome along the Evolving Global Value Chain

• Published date: 01 July 2013
• Author: An‐Chi Tung,Henry Wan
• DOI: http://doi.org/10.1111/twec.12045
• Date: 01 July 2013

Chinese Electronics Export; Taiwanese

Contract Manufacturing – The

Win–Win Outcome along the Evolving

Global Value Chain

An-Chi Tung

1

and Henry Wan, Jr.

2

1

Economic Institute, Academia Sinica, Taipei, Taiwan and

2

Department of Economics, Cornell

University, Ithaca, NY, USA

1. INTRODUCTION

CHINA’s arrival as the world’s top exporter is one of the current developments that

attracted the most attention worldwide. What seems even more remarkable about Chinese

export concerns its high-tech content than its volume. Within China’s merchandise export,

office and telecom equipment (SITC 75, 76 and 776) – among the high-tech trade – rose from

only 5 per cent in 1990 to 28.5 per cent in 2010. The last figure is not only the largest in Chi-

nese major export items, but also more than the sum of the next four categories – clothing,

chemical, textiles and agricultural products. For this category, China’s world market share

went from 1 per cent in 1990 to 27.8 per cent in 2010. The last figure is not only the largest

in the world, but also more than the sum of the next four economies (not including Hong

Kong)

1

– USA, Japan, Korea and Taiwan (see Figure 1).

Over a period of 20 years, this 28-fold expansion of the Chinese share in the world export

market – when happening to what is currently the most valuable category of the Chinese

export – is surely related to the emergence of China as the world’s top exporter, ahead of

Germany and the US. At the same time, the importance of this category, office and telecom

equipment, is also seen by the fact that even the total export value of China, as the world’s

top exporter, is still a shade smaller than the total export of this category, in the entire trading

world during 2010.

It is a post hoc, ergo propter hoc fallacy to regard such a record as natural for China,

because of its low wage and large population: first, no country with an even lower wage and

We gratefully acknowledge the helpful discussion with Simone Clemhout and valuable comments from two

anonymous reviewers. Also, the first author thanks the National Science Council for financial support

(98-2410-H0001-033).

1

Although total export of office and telecom equipment from Hong Kong is large in the world market

(10 per cent in 2010), almost all are ‘re-exports’ (98.9 per cent in 2010), and a major portion of which go to

China (65.2 per cent in 2010, as calculated from UN Comtrade databank). Therefore, Hong Kong is

included in ‘others’ in Figure 1 to avoid double counting.

The World Economy (2013)

doi: 10.1111/twec.12045

2013 John Wiley & Sons Ltd 827

The World Economy

a large population shares the same export composition or volume; second, given its large

population, its relative low wage, and an outward-oriented trade regime for nearly 30 years,

Chinese export has reached its current content and volume only recently.

However, in this era of ‘task-trading’ (Grossman and Rossi-Hansberg, 2008), the Chinese

export record does not quite convey what it used to mean. Presently, 70 per cent of the Chi-

nese export of electronic appliances is ‘process trade’, based on expensive, imported compo-

nents. In the mid-2000s, 90 per cent of the products in such categories are produced by

foreign-managed firms (Steinfeld, 2010). Consider an Apple i-pod that the US imported at a

unit cost, $144.40 from a Taiwanese factory in China, 3 per cent was to an American chip

designer, 2 per cent for memor y chips imported from Korea, 3 per cent for profit of the

Taiwanese firm, 14 per cent for a display module imported from Japan , and another 51 per

cent for a Japanese hard-disk drive producer, who made components in China from imported

Japanese parts (Dedrick et al., 2010). The value-added earned by China is far below the

(a) Composition of Chinese Merchandise Export

1990, 2000, 2010 2010

(b) Composition of World Office and Telecom Equipment Export

1990, 2000, 2010 2010

5.0%

95.0%

17.5%

82.5%

28.5%

71.5%

Office & Telecom

Equipment (SITC

75+76+776)

Others

1990

2010

2000

Office &

Telecom

Equip,

28.5%

Clothing,

8.2%

Chemcials,

5.5%

Textile,

4.9%

Agri Prod,

3.3%

Others,

49.6%

1.0%

99.0%

4.5%

95.5%

27.8%

72.2%

China

Others

1990

2010

2000

China,

27.8%

US, 8.3%

Japan,

5.7%

Korea,

6.0%

Taiwan,

5.4%

Others,

46.7%

FIGURE 1

Chinese Export of Office and Telecom Equipment

Source: WTO Statistics Databank.

2013 John Wiley & Sons Ltd

828 A.-C. TUNG AND H. WAN