The Chinese Economies

The rise of the Chinese economies – Hong Kong, Taiwan and later China – is one of the salient features of the post-Second World War economy. This paper argues that the ‘miracle' economic growth in these economies was due to a sudden increase in international demand for speed-intensive goods for which Chinese business networks have long had a comparative advantage. The argument for this proposition proceeds in three steps.

First, the concept of ‘speed intensity' must be clearly defined and shown to be empirically measurable. In Section 2, we know that a speed-intensive good has two qualities: the good requires a significant one-time fixed cost to begin production, and the expected demand is quickly decreasing. An example about hats woven in Taiwan shows all the characteristics of speed-intensive production. It tends to use variable factors of production and have local industry-wide economies of scale. In the speed-intensive sector, good entrepreneurial skills can overcome a deficit in organizational skills. Manufacturing costs are small relative to the initial sale price of the good. In the post-war period, there were three important categories of internationally-traded speed-intensive goods: (1) apparel, shoes and handbags, (2) consumer electronics and (3) miscellaneous manufactures, mainly toys and cheap plastic goods. Lightness of goods and speed intensity were the primary factors determining whether goods were shipped by air. Section 3 presents trade data which show that US imports from the China area in the above three categories were indeed speed-intensive.

Second, the Chinese economies must be shown to have a comparative advantage in speed-intensive goods. Section 4 offers a simple theoretical framework to explain how a comparative advantage in speed-intensive production might arise and persist. Serious observers of Chinese exporters describe these businesses as having the characteristics of businesses in speed-intensive