 Good afternoon. It's my pleasure to be here presenting this, another topic, TikTok technological upgrading in China and India. Thank you for inviting me to present. This presentation is actually based on work that I've done when I was at the OECD. So usually disclaimer applies here, the views expressed here solely my own,personal impact or the OECD to motivate as we know China and India Zach and India post phenomenal economic growth of the last three decades in the case of China then like over 10% per year an India around 6% own until global crisis hit with Europe for a giant different reason Abrati crisis began China and India growth rate has been slowing down a bit reflecting number of things such as weak demand from either US or Europe or some domestic macroeconomy imbalances China like credit crade the investment as bubbles and then also need to go back more rebalancing towards consumption 하지만 인도에 대한 비슷한 규정에 대한 규정에 대한 규정은 기술의 인플레이션, 기술의 인플레이션과 더 structural nature의 바다니엑스에 대한 규정은 이 공간에 대해 조금 더 긴 경험을 하고 3년 뒤, 기존의 경제의 기간을 어떻게 상징하는지, 기술의 업그레이딩을 생각합니다. 그래서, 배터리에 대한 매우 많은 기술을 제공하는 것입니다. 이 기술의 업그레이딩을 중국에 대해서도, 중국에 대해서도, 중국에 대해서도, 중국에 대해서도, 중국에 대해서도, 마치 우리의 불가능한 방법이 하나있을 것입니다. 그 영화가 열맹이 매우 큰 방향입니다. 그런 장면을 제안할 때, 기술을 업그레이드할 때가 부족하다며, 기술과 follow up와 잘 돼지 바이든의 성장에 대해서도 경험성이 생 well-developed in countries' point of view. 국적 기술을 확 esctechnology upgrading에 비해 기술의 성장 기술이 와요. 기술이 확 esctechnology defusion에 비해 그는 구조, 전통, 통과에 대해 일정한 것에 대해 알아보고 있습니다. 하지만 그는 매그로도 위험하거나 생각하거나 생각합니다. 그리고 또 어떤 기지의 수업을 통해서 생각하거나, 또한 그는 공간을 통해서 생각합니다. 그래서 그는 공간에 참여해주는 수업을 통해서 생각합니다. 또한 수업의 기지의 수업을 통해서 생각합니다. 기술, 전통기술, FDI, 그리고 기술업을 통해 또한 국가전업의 전통기술을 통해 이 3가지의 도움이 될 것입니다. 1. 기술과 전통기술을 통해 국가전업의 전통기술을 통해 중국, 인도, 국가의 경험을 통해 그리고 몇 가지가 없는 내용과 같은 영향을 담은 것입니다. 그래서 가장 좋은 방법은 대중적인 전설의 기술을 시작하여 국료를 통해 기술을 통해 기술의 전설을 통해 기술의 전설을 통해 기술의 전설을 통해 기술을 통해 그러나 typical total factor productivity is measured as a sort of residuals after you are counting for the contribution from the capital stock and the human capital labor. But clearly including Bob Solo and many other economists in the next generation after him so that important determinants of TFP is a technological progress. So TFP could be a good measure of technological change. But then another additional good reason to start with this TFP is if you look at it, I'm going to show you in a minute, in the growth literature, actually this TFP explains more than half of the cross-country variation in terms of growth and the income level. So TFP is quite useful and also important indicators. But I can come back, you know, this how we're going to construct this data but here's what it looks like. So in here 1970 through 2011, then on a vertical axis growth rate of the labor productivity output per worker and then on a horizontal axis this is the growth rate of a total factor productivity. Amazingly you can see that very, very strong correlation between those two. And then on the top of it China, you see this about 7% on average productivity growth rate and it comes with the quite close 3% total factor productivity growth. But then in terms of level, then the latest years we can get to 2011 for that then again labor productivity level and then TFP level very closely correlated. And yet China and India the level actually pretty low. So if you look at this then using this development accounting then relative to US putting US as one then labor productivity China and India was 14% and 10% each. And then in terms of components then human capital was 71% and 53% but then this TFP was 37% and 46% a little bit higher than the labor productivity itself. But then quite interesting enough in here last column unlike our perceptions about capital intensive growth in China for example, this capital deepening in terms of capital stock per worker is very, very low like 20% of US and then in India 7% of US only. So as you can see there is a huge scope for catching up in both TFP level or capital stock per worker or outcome like labor productivity itself. But this is a level. But as I said earlier, I showed you earlier, despite the level is still very low, but very interesting enough, China, especially China and then with the last degree in India they actually experienced quite strong TFP growth. So for instance China out of a 10% growth rate almost 35% explained by this TFP growth, 3.48% point. And then of course they also experienced a very strong physical investment therefore 55% of this output growth contributed by this capital investment. But then India quite similar but with the smaller magnitude but out of a close to 7% annual growth rate almost 20% explained by the TFP growth. And then another 55% coming from fiscal capital investment although coming from low level. But what striking about this three economy is compared to the newly industrialized economy such as South Korea or Singapore, Taiwan, Hong Kong, unlike their growth experience pretty dominantly driven by the capital accumulation. If you remember there was a huge debate in the 1990s like a young and crew members all emphasizing the nature of the growth happening in this newly industrialized countries. But compared to that, China and India are very interesting enough showing the very strong TFP growth although the level is still today is pretty low. So indication is technological upgrading if you accept the TFP as a good measure of technological progress then clearly technological upgrading happening quite fast pace in China. And a bit modest but in India as well. And then here's another way of looking at the technological component. The technology employed in the production process could also manifest itself in the kind of the varieties of goods or quality of goods. So we can maybe observe from the export structures. As Danny Rotary and the Shorts all year observed, what's so special about China and India is somehow they tend to export much highly sophisticated products than typical countries in their income level. And clearly as I'm going to show you using UN country data at the 3D level, clearly China, especially China has dramatically shifted into a much more capital intensive and then technology intensive products. And this is something kind of cutting cross themes. We saw that yesterday Justin Lin and then Celestine Manga, they're talking about the upgrading and then moving from a low income to middle income and then to higher income. But clearly if they stick to these comparative advantages based on the simple nature of low skill and labor intensive products then probably China's the export products might have looked very differently from what they do now. And apparently they took some two pronged approaches one, they tried to create lots of jobs so that they can observe surplus labor but at the same time they tried to upgrade the economy quite rapidly. But we'll come back to that later. But here is what you can see what's so special about China and India in terms of high tech exposures then compared to their level of income they actually stand out. Of course, Philippine in here which is not our subject but Philippine posting even striking almost 60% of the total export actually under the category of high tech. So this is what people are talking about. But we want to go a little bit further on that. So we're going to take a look at this detailed trader data and we're going to classify the technological level by the different groups. So one way to do is to use methodology by the LAL and OECD differentiating primary products resource based manufacturing such as food and then leather or cement or petroleum which is requiring some basic skills sometimes quite intensive in capital stock but low nature of the technology. But then low tech manufacturers such as textiles, apparels and foodwares things like it which are requiring some standardized well diffused technologies which are requiring a bit low level of skills. But actually these low tech manufacturers the international production network which I'm going to bring up later on it has gone through massive relocation from which to a low income country because this low tech industries wanted to benefit from low cost of labor. However though more complex design function or manufacturing function actually remaining in the advanced countries. But then a medium tech largely covering automotive or engineering products and requiring additional advanced technology and then some relatively high level of R&D components and then especially the automobiles and engine type of things requiring a lot of actually extensive supply network. And unlike low tech industries, medium tech this type of engineering products has not gone through much relocation. But then finally high technology like electronics, pharmaceutical or medical devices especially electronic components as we know now has gone through a massive relocation under the international production network or sometimes called unbundling of production stages. However industry requiring a high advanced technology, fast changing nature, high R&D components things like it. But using this kind of notions we construct some of the data but before we do that let me show you. Just China comparing the 15 largest exporters high tech and medium tech and low tech then China made the biggest gain in terms of high tech and medium tech. For example in high tech in the back in 1995 then in terms of exporters shares in the world was 13 place but now is number one 2007 before the global crisis. But then in terms of medium tech categories it was a 16 place but then now move up to fourth place. And then low tech is also number one and then India in here much much smaller compared to China in terms of integration with the world economy but India is now among the 15th place in the low tech. Yes I need to move a little bit faster. But then here as you can see China and India actually they moved out of this low tech and then into medium tech and then high tech nature. And then also India moved out of this low tech manufacturer to the medium tech but the magnitude has much much modest compared to China. So one question we are going back to the measurement of a technological progress we want to link together and then to our extent this technological sophistication might be a link to the TFP. So I construct index but then since I'm running out of time so let me move a little bit quick and then constructing this index assigning a hand numbers to the high tech more advanced technology components. Then again there is a positive correlation between technological sophistication of export and then total factor productivity. In other words countries export India more highly advanced natural products than probably learning the technological upgrading happening through a number of channels. And then or alternative countries with a higher level of technology might tend to export the specialized more into high tech natures. But having said that one striking fact is China and India they apparently having a much higher level of technological sophistication according to export nature. Compared to it actually TFP level is pretty low. So for example China then if you only take into account that the face value what they export then you this simple will suggest that TF level should be approaching a 70% of US but not only 25% India 2007. So apparently there is some gap and we'll come back for that later when I talk about international production network. But then okay since we talk about a measurement of technological upgrading then let's talk about some individual channels quickly. FDI we know that this is one of the main channel of technological progress and if I have some time later then we're going to talk about some of the policies but actually previous sessions quite lengthy in any case studies and all that providing what China has done in terms of a promotion. FDI but here's a look you know there has been big increase in the FDI and obviously China is among the top you know the recipient of the FDI inflows. And here's what you can see the strong you know policy correlation again amount of FDI against TFP growth. And then if you look at TFP growth against FDI probably originating from a more advanced countries like OECD might have a more technological components and then again quite a strong policy correlation. Then one of this you know the empirical evidence clearly you know closely clearly showing that strong evidence of a positive impact of FDI on the TFP growth. So for example you know the coefficients around 0.3 and 4 so in China case then annual average of FDI inflow has been around 3.6% of GDP. So multiplying this 0.3 or 4 then it amount 1.5% annual contribution to the TFP growth and then we saw that in the 2000 period in China TFP growth rate has been around 3.5%. So almost more than 1.3 could be explained by this FDI from the other countries. What about imports of capital goods? This could be another channels and then in here capital goods imported from the OECD countries because you know the equipment productions or R&D the activities mainly concentrated in advanced economies. So that's another maybe an important channel of technological transfer and then again there is quite a strong policy correlation. So all sorts of you know the estimation method and then they all turned out to be strongly positive like a 0.1 or 0.2% point per 1% of capital imports as a percent of GDP. But then here are some pictures for China and India. Look at this. There has been astonishingly high level of increases in the importation of the capital equipment in China. Of course Japan and Korea since you know the great take off then they gone to their very tremendous increase as a person change and yet the sheer size of magnitude in China that's actually unheard. And then another anecdote you know the evidence China became last year the largest buyer of industrial robot and clearly that could be another channel but this is a third aspect regarding technological upgrading. Yes. This international production network should be a good explanation why there is such a gap between seemingly very sophisticated export products and yet overall you know the TF level pretty low. So how are you going to reconcile these two right. And it looks like maybe it has to do with this IP and international production network because they export nature has dramatically changed into the high-tech nature and yet big questions are still lingering. How much of that actually in real. And also is it really a China doing more than actually the assembling imported parts and components. Right. And what about the role of the foreign investors in terms of this technological sophistication. And clearly this showing that you know the nature of the why China tremendously transform into a high-tech export orientation and yet the level might be a still low because processing exports more than 50% of the total. And if you look at it domestic components of the value added of export in the case China then pretty low still like 20% especially for high-tech products. And then foreign investors firms they actually explaining more than 60% of a total export in China. So I almost done but show you some bit more chart in here. So interesting enough if you look at it for example high-tech the categories then trade balance they running a trade surplus against US and Europe but they running a trade deficit against Japan or Korea or Taiwan which providing these components and the climate. And also here is another evidence strong evidence suggesting why China is a sort of major final assembler in the big international production network. If you look at it in near imports and then export of components parts and components then import is almost like 66% of the total import and yet if you look at it finish good then export is almost approaching 60%. So bottom line is China predominantly importing lots of parts and components and then in terms of export most of them finished good. So clearly that's a strong indication of China being final product assembler in this international production network. And then additional effort they having emphasizing the capacity building to innovate. So R&D expenditure for example then has been come close to 2% which is OECD average and also even India coming close to 1% so clearly they invest a lot. Of course they still have to translate into higher performance in other technological components but one very encouraging thing is this kind of patent activities. For example China then since 2000 period then in the case of 14 oriented patents family meaning patents application by the Chinese inventors filed in more than 2 countries have tremendous increase of course from a bit low level. But over the last 10 years has increased very dramatic manner separating the past behind that Russia and India and other countries. And also human capital still catching up but one interesting thing is they emphasize greatly on tertiary education unlike other countries emphasize primary secondary education. So if you look at it this all the kinds of the aspect of technology upgrading or surrounding environments then clearly this pointing into that very fertile ground for the further acceleration in the technology upgrading. So very quickly sum up then TFP level has been pretty low no matter how you measure it. Either TFP level or value components and yet in terms of percent change has been very rapidly changing improving but then this new evidence clearly show that this FTI and then import of capital good is very important in explaining. Behind that the strong TFP you know the performance but then one of the thing is a China's the role in the international production network might have some explanation why there's some still gap between the export structures and then the technology level. And yet just a couple of points to the emphasize then this technological upgrading is not happening as sort of automatic response rather they actually cultivated environment and then targeting FDI to certain industries such as high tech nature. And also they tried to promote the capability to observe technology and innovate by promoting investment in human capital and R&D. So this all add up to it seems like they been successful in generating this very rapid pace technological upgrading. But when it comes to possibility of replicating same experiences in other countries probably one thing lacking in other countries is they do not have such a big market as China and India does. So probably the kind of strategy trading market access in exchange for the technology may not be available option for all the nations which is available to China and India. But let me say it here. Thank you very much.