Advantage Of Backwardness In China

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Banks in China have been state-owned throughout the time, but since 1993 the government started a commercialization process of banks in which process the Central Bank of China has become an independent player (Baek 2005). As in the case of Malaysia, China also used the advantage of backwardness in order to promote technological and industrial upgrading. The term backwardness, shaped by Alexander Gerschenkron, points out the benefit of a country that economically lags behind to learn from developed countries in terms of economic transformation processes and cost savings (Lin 2011). Malaysia succeeded using the benefits of backwardness by emulating features of first-tier economies like Korea which is referred to as applying the flying geese…show more content…
As Lin (2011) makes clear, China’s success lies in applying the dual-track-system that is achieving to protect inefficient companies from important sectors and as well allows new firms to enter the Chinese economy and implement different legal forms. Both comparative-advantage-defying and hence capital-intensive as well as comparative-advantage-conforming and labor-intensive sectors have been supported in order to achieve stability and dynamic transformation. This outstanding feature as well enables China’s economy to keep its dynamic growth for another twenty years or more (Lin…show more content…
A number of policies have been brought up to ensure for instance technology transfer from foreign companies to local firms (Fu & Gong 2011). For example allowed the government foreign firms the access to domestic markets in order to transfer technology through Joint Ventures (JVs) and joint productions (Rodrik 2006). Firms that were acting inefficiently have been forced to merge and create JVs with foreign companies which led finally to a more export-oriented industry. Also the implementation of industrial parks has been crucial to surmount barriers to firm-entry and FDIs with the goal to test industrial policies and to approach the advantages of more liberalized markets (Lin 2011). According to Olivier et al. (2013), inward-FDIs in the manufacturing sector are by now almost completely liberalized with certain exceptions in strategic sectors and service sectors like telecommunications. Hence, the Chinese government took crucial steps to further open up its
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