A Look at Comparative Advantages
Acountry's comparative advantages are fundamental elements required for high-speed and high-quality economic development. The key question is how to develop comparative advantages and allow them to rise to their full potential?
Comparative advantages should be viewed in a scientific manner. It is far from enough to form one's own unique or featured advantages by making comparisons with external circumstances. It is also necessary to analyze one's own internal environment,namely,putting both comparative advantages and disadvantages together for a comprehensive assessment. For instance,China has an enormous domestic market. Far-sighted entrepreneurs will not sit by idly and ignore this market potential; neither will scientific and technological innovators who look to unleash this same potential. But the advantage of large market capacity is limited by purchasing power and levels of consumption.
One of China's premiers once noted that there were 600 million people with a monthly income of only 1,000 yuan (about US$166 currently). That points to a serious lack of purchasing power. Moreover,the purchases of Chinese consumers are still focused on basic necessities even though China has already solved its subsistence issues. Only by raising national income and expanding the consumption capacity of the middle class can a truly efficient market be formed. Great scale is only a potential comparative advantage; strengthening domestic weak points is the key to building comparative advantages.
Comparative advantages are also dynamic. The path of development is the connecting of developmental phases. There are no permanent comparative advantages. Take China's demographic dividend for example. With a labor force of hundreds of millions,China was able to create the "world's factory" and achieve near double-digit growth rates over almost four decades. But China has more recently become an aging society,and its population dependency ratio is climbing. Comparative advantages of the past could become comparative disadvantages in the future.