Introduction

There are fundamental changes afoot in the global economy, and no simple answers for countries that want to improve or even maintain their levels of development. In recent decades, national and regional development models have come under increasing scrutiny, and countries are trying to determine what kinds of policies and institutions provide the best opportunities for long-term growth and prosperity.

This chapter will explore these issues through a comparative analysis that focuses on how international trade and foreign direct investment (FDI) have shaped the development trajectories of China and Mexico, two of the most dynamic emerging economies in the world. The first section provides a broad comparison of the development models in Latin America and China, with an emphasis on how each has changed in recent decades. The second section uses international trade data to examine industrial upgrading patterns in Mexico and China, with an emphasis on their competitive niches in the US market and why China is taking the lead in a number of different industries. The third and final section looks more closely at a new feature of China's industrial upgrading pattern known as supply chain cities. China's unique model of economic development is fascinating in its own right, but China's escalating importance as a supplier, a market, and recently as a source of outward direct investment makes many countries and regions in the world highly dependent on China's future economic performance.

Comparative Development Models

Since the mid-1980s, globalization has been associated with a neoliberal model of development that has produced rapid economic growth and improving standards of living in some parts of the world, most notably East Asia. In other regions, like Latin America, neoliberalism has been marked by slow economic growth, large-scale unemployment, social deterioration, and political protest. Development models in both Latin America and East Asia, however, have evolved considerably during this period.

Within these regions, China and Mexico present particularly interesting cases because of notable contrasts as well as similarities in their development policies and economic trajectories. Mexico is the most diversified and export-oriented economy in Latin America, with an emphasis on manufactured exports to the United States. China is one of the world's fastest growing economies, with extensive diversification and growing exports to the world. Mexico and China compete head-to-head in many product categories in the US market