HOW MUCH DO EXPORTS CONTRIBUTE TO CHINA'S INCOME GROWTH?

It is a widespread belief that exports, in particular of 'high-tech' products, contribute much to China's income growth. This study addresses this issue by applying a structural decomposition analysis to input-output (I-O) data. We employ two extended I-O tables that distinguish processing trade from ordinary exports. The contribution of exports to the value-added growth from 2002 to 2007 is found to be overestimated by 32% when standard I-O tables are used rather than the extended I-O tables. Even more strikingly, the value-added growth that may be attributed to the exports of 'high-tech' telecommunication products is overestimated by no less than 63%. A serious overestimation of the contribution to income growth of certain products (such as high-tech products) sends out misleading signals to policymakers. When measured correctly, the true contribution appears to be substantially smaller than is generally believed to be.