Research On The Transformation And Upgrading Of China 's Processing Trade Industry

Since the reform and open policy, China’s economy has obtained the great development whose gross domestic product has ranked the world’s second, and become the focus of the remarkable. Under the background of global value chain, China depends on its advantages in the primary elements such as labor and land, participated in the division of labor in the processing trade, realize the sustained and rapid growth of the economy in foreign economic relations and trade. However, China’s processing trade has always been in low value-added links of the development of processing trade whose development is on the cost of high energy consumption, high pollution, the development is unsustainable. Accelerating the transformation and upgrading of China’s processing trade industry occupied the important position in the new normal economy in the Chinese economy whose target is high speed growth and in the high-end upgraded. With the evolution of China’s industrialization development stage and growth of per capita income level, costs of primary elements rise, which reduce the processing trade industry’s competitive advantage. Especially, after the financial crisis, the international economic growth is slowing, the supporting role of processing trade industry in China’s economic growth has become weaken. How to promote transformation and upgrading of processing trade industry based on the change of China’s comparative advantage, become the important direction of Sustainable growth of China’s economy.Many scholars have studied influencing factors and direction of China’s processing trade’s transformation and upgrading, most of the studies highlighted cultivation of high-end elements, which promotes China’s processing trade industry from low-end to high-end upgrades. This paper argues that China’s is in the comparative advantage transformation stage whose the low-level element advantage is decreasing and the high-level elements advantage has not been formed. The processing trade industry is also in an important phase of the transformation and upgrading, it should not only focus on high-end elements, but also continue to utilize their comparative advantages at the same time, such as labor input and the proportion of manufacturing industry which still plays an important role. China’s processing trade transformation and upgrading of employment need to combine high-level elements with the existing low-level comparative advantage together.Relying on the theory, this paper described the development course of processing trade industry, and analyzed characteristics of the comparative advantage conversion phase of China’s processing trade industry, proposed the path of transformation and upgrading of processing trade industry. This paper argues that the progressive upgrading mode, from technology, products, and then to the function and valve chain, is not suitable for China. The path should promote the low-end and high-end upgrading at the same time——not only promote the function and value chain upgrading, but also to promote the process and product upgrading. Then, aiming at the problem China’s processing trade industry has to face, this paper built an analysis framework of influencing factors of transformation and upgrading of China’s processing trade industry and analyzed the impact mechanism of these factors. Using the panel data model and neural network model, this paper analyzes the effect of the influencing factors variable, on the basis of the municipalities’ data. The results show that all of the level of opening, foreign direct investment, trade and industrial structure, human capital and regional scientific research ability have positive effects on transformation and upgrading of China’s processing trade industry. Among the factors, the influence of industrial structure ranks the first. Finally, on this basis, this paper puts forward policy recommendations on transformation and upgrading of China’s processing trade industry.