The Trend of Economic Complexity in China: Based on Input-output tables from 1987 to 2007

This essay employed Average Propagations Lengths and data of input-output chart from 1987 to 2007 to measure China’s economic complexity and change. The research shows that, different from the tendency of decreasing interior economy system complexity and change in OECD countries, China’s economic complexity is in general raising due to adopting exporting extroverted type of strategy, accepting industry transmission from developed countries, expanding economic scope, deepening industrial work division, strengthening relationship between industries and expanding industry chain. China’s economic complexity index raised 34.9%, from 2.69 in 1987 to 3.63 in 2007. Between 1997 and 2002, China fastened the steps of annexation and reorganization of state-owned enterprises, which made part of the economic activities change from market trades into enterprise interior trades, hence the decrease of economic complexity during this period. Change for each industry (capital change or need change) caused higher average propagations lengths impact on other industries. However, capital change of energy and mineral resources exploitation industry caused evidently higher average propagations lengths of having impact on other industries, which shows that the fundamental positions of these industries in the industry chain were stronger; while need change of wholesale and retail, real estate and social service industry caused evidently higher propagations lengths of having impact on other industries, which shows that as the terminal industries of the industry chain, these industries have wider backward drawing impact on other industries. Since the reformation and opening, China’s unbalanced developing strategy has changed the layout of China’s economic activities- economic activities were speeding up gathering towards the east coastal regions, therefore, east coastal areas such as Guangdong, Zhejiang and Jiangsu had apparently higher economic complexity and with faster raising speed than mid-west areas such as Jiangxi, Hunan, Shanxi and Xinjiang. Policy inspirations drawn from the foregoing research results are:

Firstly, since reformation and opening, China’s economic complexity has evidently raised, so that we should be careful with economy intervene policies. Intervening any industry could transmit the effect to other industries through direct or indirect multiple lengths, which will have impact on other industries. Secondly, capital change of energy and mineral resources exploitation industry caused evidently higher average propagations lengths of having impact on other industries, therefore to restrain the over-fast capital raising of these industries is effective for controlling inflation; need change of wholesale and retail, real estate and social service industry caused evidently higher propagations lengths of having impact on other industries, therefore, to promote the need raise of these industries is effective for driving other industries. Thirdly, we’ve entered a new century, with implementation of Development of the West Regions and Rising of the Middle Regions strategies, the government increased investment on mid-west regions. Economy in mid-west provinces such as Inner Mongolia and Hunan was growing rapidly. However, economy of mid-west areas has problems such as single industrial structure, shorter industry chain, situation of depending on traditional mining and natural resources industry has not changed and follow-up developing capability is not very strong. Therefore, to strengthen industrial relevance of mid-west industry, expand its industry chain and form developing centers for some manufacturing industries are very meaningful for helping mid-west regions carry out long-term sustainable development.

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