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¶ … Heckscher-Ohlin explain China's Trade?

Introductory Paragraph

The Heckscher-Ohlin Theorem, essentially, states that a capital-abundant country will export capital-intensive goods, whilst a labor-abundant country will export labor-intensive goods. The following essay suggests that contemporary USA and China follow the pattern of the Heckscher-Ohlin Theorem where America, low in unskilled human labor but high in capital and agriculture, exports those goods in quantity, whereas China, low in capital but rich in unskilled human labor, exports those resources. Focusing on China, the essay traces China's current economic policies and patterns of trade in order to establish whether China's pattern of trade is consistent with the predictions of Heckscher-Ohlin.

Statement of the Problem

The Heckscher-Ohlin Theorem states that a capital-abundant country will export capital-intensive goods, whilst a labor-abundant country will export labor-intensive goods. The following essay wonders whether China's economic policies and system, in general, and the Chinese-U.S. trade routine, in particular, coheres with the predictions of the Heckscher-Ohlin theorem.

Student's Solution to the Problem

Since 1975, Chinese production and exportation of food and agricultural products has markedly declined. China, after all, has relatively little arable farmland with which to grow produce. On the other hand, 1975 and onwards has also seen a marked growth in manufacturing products, particularly labor intensive ones, such as apparel.

Even in the form of agricultural goods, although China does produce land-intensive products such as soybeans, cotton, and grains, being relatively poor in capital, its focus has shifted to, and accentuates, labor-intensive crops such as garlic, mushrooms, sweet corn, peppers, leeks, cut flowers, apples, and pears. In all of this -- and conforming to the Heckscher-Ohlin theorem, we see that the focus lies on labor-intensive resources to the polarity of capital-intensive resources.

As regards the manufacturing sector, data demonstrates that U.S. exports to China is concentrated on the high-skills sector -- aircraft parts and inorganic chemicals, for instance, make up a high 48.8% of U.S. exports to China and engines and turbines constitute 21.3% of U.S. exports. China's exports to the U.S., on the other hand, features the low-skilled sector; 17.2% of its exports lie, for instance, in weaving, wool, leather tanning and fishing, whilst another 23.5% consists of children's footwear, outerwear, and non-rubber goods. The chart, progressing from 'most skilled' goods to 'least skilled' goods, indicates that American exports lie in the upper portion of the list, whilst Chinese exports to the U.S. fall all the way to the bottom. The pattern of U.S.-China trade in 1990 fits closely with Heckscher-Ohlin predictions. America, low in unskilled human labor but high in capital and agriculture exports those goods in quantity, whereas China, low in capital but rich in unskilled human labor exports those resources.