DOES EXPORT DIVERSIFICATION MATTER FOR CHINA'S REGIONAL GROWTH?

China has enjoyed high economic growth for more than three decades since the initiative of economic reform in early 1980s. This growth has been driven mainly by labor-intensive export-oriented manufacturing activities. Yet, there are remarkably few empirical studies of the link between export diversification and economic growth. In this paper, the effect of export diversification on economic growth in Chinese provinces in the period 2000-2006 is examined. The findings support cross-country evidence that regions with diversified export baskets enjoy higher economic growth. However, it is found that the growth benefits are linked to diversification of export products, rather than geographical diversification of exports. Further, it is also found that the growth effect and export diversification may have a nonlinear relationship. As such, governments promoting export diversification should distinguish the diversification of export products from that of export destinations. Their policies should also change as regional economies develop.