Research On China 's Manufacturing Industry Participating In International Vertical Specialized Division Of Labor

In the context of economic globalization, the global value chain and the production network continuously perfect. The inter-industry trade which belongs to the traditional international trade pattern is gradually replaced by inter-industry trade, intra-industry trade and intra-product trade. International division of labor is gradually replaced by the division of different value chain of the production network. The global trade transfers from the exchange of final goods to the exchange of intermediate goods which include the primary products, semi-finished products, parts and components. As a new method of the global labor division, the vertical specialization has witnessed a rapid development. Based on the view of FDI and intermediate goods trade, the author makes a research on vertical specialization of China in manufacturing sector.Firstly, based on the general equilibrium analysis framework, the author constructed a D-S model which has two countries, three industries and three factors and a B-E model which has of the two countries, three factors, three products and three enterprises. The labor factor is divided into skilled and unskilled labor. The author improves the hypothesis that the production is specialized completely, analyzes the FDI determinants of vertical specialization as well. The article discusses how FDI affects the intermediate goods trade and vertical specialization in manufacturing sector. The article also discusses how FDI affects the number of vendors in host country and home country, the price of intermediate goods and final goods, as well as the factor income. The author analyzes how the structure of intermediate goods affects the structure of final goods. The author finds that FDI affects vertical specialization through the number of vendors in host country and home country, the price of the intermediate goods, factor income and other variables. The author also finds that FDI, intermediate goods trade and final goods trade presents complementary relationship. These propositions and conclusions not only enrich the theory of vertical specialization, but also lay a theoretical foundation for the experience and empirical analysis later. Secondly, based on the reality of China’s economic, the author builds an index evaluation system which describes the vertical specialization. In the study, a series of indicators such as the international market share, the advantage index, the trade competitiveness index, the export growth rate advantage index, the export share index and the trade competitiveness index are used. The author measures the vertical specialization index of China in general and sub-sectors through HIY method. The author finds that the textiles, the feathers and its products, furniture manufacturing and other industries have an absolute advantage in international manufacturing competition, which explains the characteristics of intermediate goods trade of China’s manufacturing. It provides empirical evidence to support the vertical specialization theory. The vertical specialization status of China is evaluated by the factor intensity and the technical complexity. The author finds that the processing trade and FDI has become the main way for China to participate in the manufacturing industry vertical specialization. The intermediate goods trade of China upgrades to the semi-finished products, primary products, parts and components. The capital-intensive industry and high-tech industry of China have the highest degree of participating in international vertical specialization. The resource-intensive industry and low-technology industry have the lowest degree of participating in international vertical specialization. The high-tech-intensive industry is the main direction of China’s future development. Thirdly, the author uses the panel test, co-integration test, ADF unit root test, error correction model and Granger causality test to make an empirical test. The paper uses panel data to empirically test the theoretical model. The empirical results show that the final goods trade, intermediate goods trade, FDI and GDP are positively correlated. The empirical results also show that the final goods trade、intermediate goods trade and FDI presents complementary relationship. The results show that the position of China in international production networks is improved with the increase of multinational FDI to China. The author finds that China’s manufacturing vertical specialization, intermediate goods trade and FDI exists a long-term stable equilibrium relationship. The author also finds that FDI is the Granger cause of intermediate goods trade, but FDI is not the Granger cause of vertical specialization. The results show that the position of China in international production networks is improved with the increase of multinational FDI to China. Thus, China should make full use of the spillover effect of FDI in order to enhance the competitiveness of the manufacturing sector.