How Did China Get Rich?

Persons who begin with large capitals do not succeed, generally speaking, so well as those who begin with small ones cautiously administered.

(Andrew Ure. The Philosophy of Manufactures. 1835)

How did China get rich? Or, to put it another way, how did it become the workshop of the world?

Only yesterday it was a USSR-from-Wish, a poorer, more dysfunctional version of the Soviet Union.

Today, everything you buy, everything you wear, everything you stare into, everything from your shoes to your household appliances is more often than not imported from China. At this point China is the manufacturing giant, swallowing one industry after another and throwing its competitors from the old industrial powers off the market.

How on earth did that happen?

One way to address this question could be: look at its exports. We all understand China is the world’s largest exporter by far, in terms of sheer size. Still, it would be interesting to know what exactly makes for the size of its exports. In other words, what is the structure of this “everything” that China is selling to the world.

Let’s have a look at what China is exporting

NB: I will be using data & infographics provided by the Observatory of Economic Complexity. If you have nothing to do this evening, explore their website.

….

Or not. I have actually reconsidered. We will not be looking at what China is selling now, and will be looking instead at what it was selling in the year 1995, long before it turned into the Leviathan of the modern day.

So, what was China selling in 1995?

It was selling textiles, natural and synthetic. It was selling electronics. It was selling plastic stuff, many, many goods and appliances made of plastic. It was selling stuff made out of leather.

Long story short, it was selling consumer goods. China was selling cheap, low tier consumer goods produced by its privately owned light industry. Heavy industry, large SOEs made for a relatively minor share of Chinese exports. They made stuff, of course, they just did not export it much.