Mainland China’s exports have grown in important in recent years because they are a critical component of the modernization process. Mainland China’s new trade policies, which emphasize the export of labor-intensive products, will, however, conflict with the exported goods of other developing countries. This study explores this problem. More specifically, it examines two key questions: (1) How much competition do Taiwan’s exports to Japan face from Mainland China’s exports? and (2) Which specific product groups, if any, are under pressure? In addition, the exports of South Korea, Hong Kong, and Singapore to Japan are compared with those of Taiwan.
The following is a summary of the major findings:
(1) Based on regression analysis, the paper finds that among the most competitive exporters, real exports to Japan have been determined by real income of Japan and by nonprice competitive factors. Only for Mainland China has price served as an important explanation of export performance.
(2) A comparison of Taiwan’s exports with those of Mainland China, South
Korea, Singapore, and Hong Kong reveals that Taiwan’s textile exports face competition from Mainland China, South Korea, and Hong Kong, while its agricultural products compete with the exports of Mainland China and South Korea. Taiwan’s exports of machinery, electrical equipment, precision instruments, and metal products must compete with similar products from South Korea, Hong Kong, and Singapore.
(3) An analysis of the changes of both long and short-run market shares of the countries under study demonstrates that is only one product – crab (fresh or frozen) – in which Taiwan’s and Mainland China’s exports directly squeeze one another. For other product areas, the data demonstrates that either Mainland China together with other countries has encroached on Taiwan’s market position, or Taiwan together with other exporters has made inroads into the market share of Mainland China.
(4) According to an analysis made of the elasticity of substitution between exports from Taiwan and Mainland China, strong price competition exists for a large number of agricultural and textile exports.
