A Study On The Influencing Factors And Welfare Effects Of China’s Participation In The Global Value Chain

In the past 30 years,with the revolution of communication technology and trade barriers reduction,the world economy has witnessed the Age of Global Value Chains.Countries have embedded in specific stages along the global value chain depending on their comparative advantages,and thus obtained welfare gains induced by the diversity bonus and production efficiency improvement.As an emerging economy,China is gradually occupying a pivotal position in the "conjugate circulation" formed by the value chain circulation of developed countries and developing countries(Hong and Shang,2019).However,we should be aware of the upgrading problems in the process of global value chain participation.On the one hand,China has embedded in the global value chain based on processing trade,and the global value chain participation pattern by undertaking the industrial transfer of developed countries not only exacerbates China’s resource shortage but also leads to serious environmental problems by the international transfer of polluting industries.And it is easy to fall into the dilemma of low locked since the global value chains are dominated by developed countries.How to achieve China’s upgrading along the global value chains while obtaining the welfare effects of global value chain development is indispensable.In addition,as micro subject,firms’ stage and position along the global value chains is directly related to their governance ability and performance,thus affecting China’s development efficiency and quality,and even determining China’s economic status in the world.Although the existing literature has discussed the global value chains participation from macro country level and the global value chains position from the micro firm level,but little literature has discussed China’s global value chains participation under the macro and micro unified framework.In addition,there is little literature that systematically investigated China’s global value chain participation from the perspective of micro firm’s dynamic behavior.And little literature sheds light on a firm’s global value chain position upgrading and its mechanism.So how to reveal the mechanism of Chinese firms’ global value chain position upgrading from a micro perspective?On the other hand,under the background of China and the United States trade frictions escalating and the economic downturn caused by the global epidemic,how taking advantage of RCEP signing to achieve transformation and upgrading of traditional industries and China’s global value chain position upgrading through the mutual promotion of domestic and international dual cycle development?To solve the above problems and achieve the goal of China’s transformation from a big manufacturing country to a manufacturing power and high-quality economic development,we must first be clear about the position and driving factors of China’s embedding in the global value chains.Accordingly,this paper uses the structural decomposition analysis method to analyze the main driving factors of the changes in the position of China embedded in the global output supply chain and input demand chain,which is of great significance for understanding the evolution of China’s role in the international trade and achieving global value chains upgrading.On this basis,this paper examines Chinese manufacturing firms’ global value chain position upgrading and its mechanism from the perspectives of trade liberalization,human capital accumulation,and environmental regulations,respectively,to provide micro empirical evidence for promoting firms’ global value chain position upgrading.The conclusions are helpful for how to improve the competitiveness of manufacturing firms in the international market,and of great significance to avoid being low locked in the global value chains.Finally,based on the background of China’s signing of RCEP,this paper uses the structural estimation to systematically evaluate the trade creation and transfer effects,global value chain participation,industrial transformation and upgrading,and welfare effects.And we mainly focus on the impact of RCEP commitment to tariffs reduction on China’s global value chain participation and welfare changes.The conclusions help understand the impacts of RCEP on global value chain rebuilding and East Asian regional value chain integration,and how China can achieve high-quality development in the global value chain reconstruction.The structure of the paper is as follows:Chapter 1 is the introduction.Chapter 2 is the literature review.Chapter 3 introduces the accounting methods of the global value chain related indicators and analyzes China’s participation in the global value chain.Chapter 4 to Chapter 8 are the main empirical works.Chapter 9 includes conclusions,policy implications,and future direction.Using the structural decomposition analysis method,Chapter 4 analyzes China’s ordinary and processing trade-based GVC position changes and further investigates the driving factors.We find that,firstly,China’s GVC position reveals upward trends in both output supply chain and input demand chain,and the increase of China’s GVC position is mainly driven by the intra-industry effect.The increase of China’s position in the global output supply chain for ordinary trade and processing trade is driven by the intra-country intermediate supply network expansion and the inter-country intermediate supply network effect,respectively.However,the position of China embedded in the global input demand chain under different trade regimes increased,which is mainly driven by the intra-country intermediate demand network expansion.Therefore,it is of great significance to formulate different global value chain upgrade strategies based on the differentiated characteristics of China’s participation in the global value chain under different trade modes,especially to attach importance to the construction of a perfect domestic intermediate supply and demand network system.Secondly,the decomposition results of "price-quantity-net inventory adjustment"reveal that the rise of China’s position in the global demand chain is mainly dominated by the quantity effect(67.51%),followed by the price effect(26.22%).In terms of sectors,the rise of China’s global input demand chain position for service sectors is mainly driven by quantity effects,while the manufacturing sectors are driven by the increases of relative price.Therefore,we should enhance the ability of coordinated development between manufacturings and services,and attach importance to the role of service-oriented development of manufacturings in realizing China’s GVC position upgrading in the global input demand chain.Thirdly,from the perspective of micro firms participating in the value chain,we find that the average export upstreamness of China’s manufacturing firms experienced a rise.However,the import downstreamness for different trade types fluctuates greatly.The dynamic decomposition results show that the increase in the export upstreamness of China’s manufacturing for ordinary trade is mainly driven by the enter effect and within-firm effect,while the driving force for processing trade is the intensive margin.The decline in the import downstreamness of China’s manufacturing for ordinary trade and processing trade are mainly caused by the enter effect and extensive margin,respectively.Chapter 5 to Chapter 7 systematically investigate Chinese manufacturing firms’GVC position changes and mechanisms from the perspective of input trade liberalization,human capital accumulation,and environmental regulation using the difference-in-defferences methods,respectively.We find that,firstly,input trade liberalization has significantly promoted Chinese manufacturing firms’global value chain position upgrading.The mechanism checks reveal that input trade liberalization promotes firms’ GVC position through the effects of resource optimization caused by import competition.Specifically,the resource reallocation effects of input trade liberalization on firms’ GVC position are both significant for firm and intra-product within the firm.Secondly,using Higher Education Expansion as policy shock,we find that industries that are relatively more human-capital intensive experienced a larger GVC position upgrading after 2003 than they had in prior years.Mechanism analysis shows that human capital expansion increases firms’ GVC position not only through an imported intermediate inputs effect,especially the import of high-quality intermediate inputs,but also through an innovation effect,and the expansion of human capital has significantly promoted firms’ R&D investment and the total number of innovation,and mainly promoted the high-quality innovation.Thirdly,environmental regulations have a significant negative effect on a firm’s span of production stages.Two channels identified are the input and output effects and emission reductions effects.On the one hand,firms need to spend more costs on pollution abatement as a response to tougher environmental regulations,which will crowd out the firm’s productive and manufacturing investment.On the other hand,firms will control for pollutant emissions through emission abatement interventions,and these emission reduction behaviors will be accompanied by a decline of the firm’s position along the global output supply chain.The empirical test results based on the above chapters show that to realize the firms’GVC position upgrading,on the one hand,China should further promote the process of opening to the world,especially the input trade liberalization,remove the institutional obstacles hindering the development of marketization,and attach importance to the role of more open foreign trade policies in promoting firms GVC position.On the other hand,we should pay full attention to the decisive role of higher education reform and the advanced transformation of human capital in a country’s participation in the global value chain.Promoting China’s high-quality economic development with high-quality human capital is a feasible way to get rid of the dilemma of low locked in the global value chain.Finally,under the background of China’s transformation from high-speed to high-quality growth,how to alleviate the problem of environmental pollution and realize the double-win of improving quality and efficiency in the form of GVC upgrading puts forward higher requirements for firms’ participation in the global value chain.Based on the background of China’s construction of a high-quality free trade network,by distinguishing the trade costs of intermediate inputs and final goods,Chapter 8 expands the theoretical model framework of Caliendo and Parro(2015)to better match the Global Inter-Regional Input-Output data.The results show that,first,the trade effect created with RCEP will increase the value-added exports by US$167.397 billion,and the value-added exports will be diverted from countries outsides to members.But the two-way value-added exports between North America and the EU will both decrease.Second,after the signing of RCEP,the GVC trade,GVC participation,and vertical specialization of the members will all experience rise,and RCEP has made the number of production stages in China’s textile,electrical and automotive industries shift from domestic to regional,accelerating China’s industrial transformation and upgrade.Third,the signing of RCEP significantly improves all members’ welfare.The welfare increases by 0.224%,0.173%,and 0.740%for China,Japan,and South Korea,respectively.And the average welfare increases by 1.756%for ASEAN countries.In addition,the contribution of global value chain effects and final product effects to changes in welfare is 55.19%and 44.81%for RCEP members,respectively.Further decomposition of welfare changes based on sources reveals that the RCEP intra-regional and extra-regional effects are 88.45%and 11.55%,respectively.This paper verifies that denser global value chain linkages will amplify the welfare improvement effect of RCEP,and is mainly driven by intra-regional effects.Chapter 9 summarizes,puts forward policy suggestions,and points out possible future research directions.