Leading Dragon Phenomenon: New Opportunities for Catch-up in Low-Income Countries

Abstract

Modern economic development is accompanied by the structural transformation from an agrarian to an industrial economy. Since the 18th century, all countries that industrialized successfully have followed their comparative advantages and leveraged the latecomer advantage, including emerging market economies such as the People's Republic of China (PRC), India, and Indonesia. The current view is that Chinese dominance in manufacturing hinders poor countries from developing similar industries. We argue that rising labor cost is causing the PRC to graduate from labor-intensive to more capital-intensive and technology-intensive industries. This will result in the relocation of low-skill manufacturing jobs to other low-wage countries. This process, which we call the “leading dragon phenomenon,” offers an unprecedented opportunity to low-income countries. Such economies can seize this opportunity by attracting the rising outward foreign direct investment flowing from Brazil, the PRC, India, and Indonesia into the manufacturing sectors. All low-income countries can compete for the jobs spillover from the PRC and other emerging economies, but the winner must implement credible economic development strategies that are consistent with its comparative advantage.

China-Africa co-operation in structural transformation: Ideas, opportunities, and finances

“…In particular, they can seize the opportunities of labour intensive industrial relocating from China and other emerging markets (Lin 2012c;Chandra, Lin, and Wang 2013).…”

“…Since 1983, capital-intensive machinery and transport-equipment products have accounted for the majority of exports. After the mid-1990s, their share exceeded half of total exports, which means Korea has graduated from labour-intensive manufacturing (Chandra, Lin, and Wang et al 2013).…”

“…The re-allocation of China's manufacturing to more sophisticated, higher value-added products and tasks will open great opportunities for labour abundant, lower-income countries to produce the labour-intensive light-manufacturing goods that China leaves behind. As a result, China will not be a goose in the traditional flying geese model but a leading dragon, which opens up a huge opportunity for numerous lower-income countries to step into the vacuum left by its industrial upgrading (Lin 2012d;Chandra, Lin, and Wang 2013).…”

Establishing world-class universities in China: deploying a quasi-experimental design to evaluate the net effects of Project 985

“…To this end, the implementation of Project 985 in this elite group appears to merely serve as a natural extension of their aspirations for achieving international prominence rather than an intervention, which, however, has given Tier 2 '985' universities a whole new look in research productivity. Moreover, Tier 2 '985' universities, enjoying the advantages of latercomers, have emulated the leading universities and hence progressed at a quicker speed (Chandra, Lin and Wang 2013). In sum, the estimation of policy effects and the implications with regard to the evolution of stratification in the system are reconciled by the decomposition analysis which demonstrates a trend of divergence between '985' and '211'…”

Development beyond aid: Utilizing comparative advantage in the belt and road initiative to achieve win-win

“…A dynamically growing developing country is in the best position to help a poor country to jumpstart dynamic structural transformation and poverty reduction: it can share its experience of building a localized enabling environment in SEZs or industrial parks, and it can relocate its labor-intensive light manufacturing industries to the poor country in a "flying geese pattern" (Lin, 2012;Chandra, Lin and Wang 2013).…”