Global Value Chains and China's Exports to High-income Countries

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.

Does global value chain participation boost high technology exports?

“…It seems that a one percentage point increase in GVC participation is associated with a 0.05% rise in high‐tech exports. This result obviously supports the idea that GVCs would play a significant role in explaining of high‐tech exports (Ndubuisi & Owusu, 2021; Srholec, 2007; Xing, 2016).…”

Do International Capabilities and Resources Configure Firm’s Sustainable Competitive Performance? Research within Pakistani SMEs

“…Emerging markets such as China encourages investment in international technology in order to increase the efficiency and competitiveness of her firms [38]. Advance technology of multinational companies enables host firms to seize a position in the market that provides a competitive position [39]. Having access to foreign technology, a host firm can easily promote trade with international firms.…”

Economic network dynamics: a structural analysis of the international connectivity of Chinese manufacturing firms

“…Many academic scholars have enquired about the main key factors that have characterised the worldwide expansion and diversification of Chinese exports in the global markets. From the analysis of the literature, these factors can be summarised in five different points (Xing, 2016):…”

“…Many academic scholars have enquired about the main key factors that have characterised the worldwide expansion and diversification of Chinese exports in the global markets. From the analysis of the literature, these factors can be summarised in five different points (Xing, 2016): (1) the abundant labour endowment and corresponding comparative advantage in labour-intensive products (Adams et al ., 2006); (2) reforms of domestic institutions, such as the transition to a market-oriented economy, the adoption of export-led growth strategy and unilateral trade liberalisation (Chang and MacMillan, 1991; Hu and Khan, 1997; Li and Matlay, 2006); (3) the improved market access for China's exports through institutional arrangements, namely the World Trade Organisation (WTO) membership, bilateral and multilateral free trade agreements and the abolishment of multi-fibre arrangement (Prasad, 2009); (4) the exchange rate regime adopted by the Chinese government and an undervalued currency (Marquez and Schindler, 2007; Thorbecke and Smith, 2010); (5) massive inflows of export-oriented foreign direct investments (FDIs) (Zhang and Song, 2001; Whalley and Xin, 2010; Udemba et al ., 2020).…”