Functional Upgrading in China's Export Processing Sector

39 Pages Posted: 13 Oct 2017

See all articles by Ari Van Assche

Ari Van Assche

HEC Montreal; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Johannes Van Biesebroeck

K.U.Leuven; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: July 11, 2017

Abstract

Functional upgrading occurs when a firm acquires more sophisticated functions within an existing value chain. In this paper, we analyze if there is evidence of this type of upgrading in China’s export processing regime by investigating dynamics in the relative prevalence of Import & Assembly (IA) versus Pure Assembly (PA) processing trade over the period 2000-2013. Firms in both regimes provide similar manufacturing services to foreign companies, but IA firms also conduct the sophisticated tasks of quality control, searching, financing and storing imported materials. Consistent with a trend of functional upgrading, we show that the share of IA trade in total processing trade has increased rapidly during the period 2000-2006, both overall and within product categories. Furthermore, we find that this trend has gone hand in hand with improvements in a sector’s labor productivity and unit values. Against expectations, we find that this process has slowed down notably during the period 2006-2013.

Suggested Citation

Van Assche, Ari and Van Biesebroeck, Johannes, Functional Upgrading in China's Export Processing Sector (July 11, 2017). Available at SSRN: https://ssrn.com/abstract=3052232 or http://dx.doi.org/10.2139/ssrn.3052232

Ari Van Assche (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Johannes Van Biesebroeck

K.U.Leuven ( email )

Naamsestraat 69
B-3000 Leuven
Belgium
+3216326793 (Phone)
+3216326796 (Fax)

HOME PAGE: http://www.econ.kuleuven.be/public/N07057/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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