Global Value Chains and China's Exports to High Income Countries

GRIPS Discussion Paper No. 15-06

20 Pages Posted: 20 Oct 2015

See all articles by Yuqing Xing

Yuqing Xing

National Graduate Institute for Policy Studies

Date Written: October 19, 2015

Abstract

This paper argues that global value chains (GVCs) have functioned as a vehicle for “Made in China” products to enter international markets, especially the markets of high income countries. It identifies three spillover effects to Chinese firms participating in GVCs: brands, distribution networks and lead firms’ technology innovations. By participating in GVCs, Chinese firms are able to bundle low skilled labor services with advanced technologies and globally recognized brands, and then sell their low value added services to the consumers of international markets. The competitiveness of China’s processing exports is largely determined by more than 50% of foreign contents embedded in the exports. Using the panel data of bilateral processing exports covering more than 100 China’s trade partners, it shows there exists a significantly positive correlation between the share of processing exports and the income of trading partners, implying that processing trade is an effective means for “Made in China” products to enter high income countries. The cross-country heterogeneity of processing exports also indicates China captures relatively more value added in its exports to low income countries than to high income countries.

Keywords: GVC, Export, China

JEL Classification: F14, F23

Suggested Citation

Xing, Yuqing, Global Value Chains and China's Exports to High Income Countries (October 19, 2015). GRIPS Discussion Paper No. 15-06. Available at SSRN: https://ssrn.com/abstract=2676477 or http://dx.doi.org/10.2139/ssrn.2676477

Yuqing Xing (Contact Author)

National Graduate Institute for Policy Studies ( email )

Japan
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81-3-6439-6010 (Fax)

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