Download file 116 KB Texto completo en español More of: Ramón Delpiano Sebastián Claro

Chinese imports to Chile grew at an annual average rate of 29% between 1990 and 2005 while imports from the rest of the world grew at an average rate of 9.6%. This paper finds that the principal determinant in the heavy growth in China’s share is an increase in the relative quality of Chinese products that raises demand for Chinese varieties, in addition to the number of varieties available from China. The drop in the relative price of Chinese products explains a small percentage of the Chinese penetration. The results further suggest that the improvement in the quality of Chinese products is due to increases in the productivity of the companies in that country. According to the authors of this article, this highlights the need to encourage improvements in productivity and substantially elevate the quality of education in Chile. Otherwise, the capacity to differentiate Chilean products from Chinese products with a low price/quality ratio is quite limited, which could lead the economy towards a greater specialization in natural resource-intensive goods where the comparative advantages are evident.