The Dynamics of Structural Change – The European Union´s Trade with China Volume 3 Jena Economic Research Papers 2009-07-08 2009 2007 2009-053 Comparative advantage Intra-industry trade Fragmentation EU China Sino‐European trade relations have been controversially  discussed mainly, if not only, because of the increasing  European Union’s bilateral trade deficit with China. As from  the European perspective trade with China becomes more important, the structural adjustment process of the Chinese economy from inter‐ndustry to intra-industry trade is not as intensively discussed. We show how the  emergence of China on the world markets has affected  European comparative advantages over time. The change in bilateral trade is compared to the overall development of European comparative advantages to highlight the features  of the structural change in China. We show that China is increasingly specialising in  technology intensive goods. This development is absolutely  in accordance with the historical perspective on country’s  upgrading in technology while integrating into the world  economy. Technology intensive Schumpeter goods are  either of a mobile or an immobile type based on the  selection criterion of separating research and production  process. While China predominantly focuses on the mobile type of Schumpeter goods, the European Union maintains its comparative advantages in immobile technology intensive goods, which are harder to imitate. Based on technology intensity, the second issue presented in the paper  focuses on the Chinese integration into the world‐wide  value‐added chain, which has been fragmented across borders  in recent years. Not least due to increasing FDI, intra‐industry trade has become more prevalent in bilateral trade relations with China. jportal_jpjournal_00000016 2010-12-17T11:54:04.287Z 2009-07-08T11:58:25.744Z