more recently, through the help of domestic R&D. In its effort to strengthen industry, China has been aided by two closely related trends. First, because of the maturing of certain technologies and the parallel growth of consumer markets, many manufactures have become standardized commodities. Second, the very process of "commodification" has been supported by the codifying of the associated technologies, some embedded in equipment, others available from suppliers. These changes have made it easier to absorb new production methods and quickly achieve high levels of efficiency. These developments have also made the production of mass market items increasingly mobile globally.
China has benefited more from these trends than most other countries, because it was better prepared to assimilate manufacturing technology, for a number of reasons, including the advantages of a potentially huge domestic market and the rapid increase in workers with secondary and tertiary education. Export-led growth was greatly aided by the flow of FDI, as firms in Hong Kong (China) and other neighboring economies shifted production facilities to take advantage of China's low-wage industrial workforce and establish a foothold in the Chinese market (Berger and Lester 1997). As a result of the transfer of hard and soft technologies aided by the growth of human capital, industrial capability has grown by leaps and bounds, facilitated by the elastic supply of rural workers to China's burgeoning industrial cities in strategic locations along the east coast. The buildup has been supported by rising investment in urban, transport, and energy infrastructure, which has helped sustain China's cost advantage, making it the workshop of the world for a range of mass produced goods. China has clearly demonstrated a knack for absorbing and harnessing codified technologies far in excess of other industrializing countries. It has also invested heavily in fixed plant, which has lowered the average age of equipment to 7 years (compared with 17 years in the United States) (Boston Consulting Group 2006). At the same time, the number of science and technology workers rose sharply, from 755,000 in 1998 to 1.2 million in 2004 (Shang 2005).
Dobson & Safarian (2008) argued that if China is making the transition from imitation to innovation we should expect to see institutions that promote technical advance and firms that develop new capabilities, technologies and products. A striking feature both of the studies in the literature and our survey is the increasing competitive pressure on firms that encourages learning. Intense product competition and demanding customers encourage rising R&D spending and the development of new products and processes, imitation of competitors, linkages with foreigners and local research institutions, and increased emphasis on incentives and development of human resources in their own organizations. Dobson & Safarian (2008) found evidence of some new inventions measured by novel patents granted, but most innovations were adaptations and process innovations. Jefferson et al (2006) and Brandt et al (2007) point out how productivity is rising because of the creative destruction of firm entry and exit rather than the adoption of new technologies. Heston (2008) notes that the increase in total factor productivity was an important factor in economic growth, with productivity accounting for 40.1% of the GDP increase, compared with a decline of 13.2% for the period 1957 to 1978 - th
