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AbstractThis paper looks at the role of textile exports inJapan andChina's economic development in the period of 1868–1930 as a major explanation for the "LittleDivergence" between the two countries in the context of the "GreatDivergence" betweenEurope andAsia. Because of textiles' large weighting in proto‐industrialization gross domestic product (GDP), we postulate thatChina's initial 20‐year lag in textilesvis‐à‐vis Japan turns out to be fatal for its industry and that it eventually ordains totally different development patterns for the textile industry in the two countries, which ultimately led to different growth patterns for the overall economy. Although both countries saw rapid growth of textile exports, the nature of those exports and the entailed position of each country in the industry value chain of trade were quite different. We then useGranger causality tests to show that in one case (Japan) it is in support of the export‐led‐growth hypothesis (ELG) while in another (China) it is not. Our study then also explains whyJapan's industrial revolution took place much earlier thanChina's.