Study On The Structural Upgrading Of Processing Trade On The Basis Of Vertical Specialization

The paper attempts to analyze, through the theory modeling, the situation of developing nations' participation into vertical specialization through processing trade, as well as the change of the trade condition and the trade benefit in the process of the structural upgrading of processing trade, and investigates empirically how to promote the structural upgrading of processing trade in China.By comparing and distinguishing the related conceptions, the paper considers that the term "vertical specialized trade" is defined consistently with the definition of processing trade in China, so we can utilize the theory related to vertical specialization to analyze issues of processing trade in China. Therefore, the paper first investigates the present situation of world vertical specialization trade, as well as the Chinese processing trade development, and puts the focus on the discussion of the evolution and its tendency of the processing trade structure in China in the past two decades. Analyzed from the worldwide adjustment of industrial structure and the Chinese economy development, the future situation of Chinese processing trade structure will evolve to the situation that pays attention to the high technology industry as well as to the labor-intensive industry.From the perspective of vertical specialization, the paper attempts to apply related theories to analyze the influence of the participation, through processing trade, into international specialization on the developing countries. The theoretical analysis conclusion indicates that, participation through the processing trade to the relative higher capital-intensive industry specialization, may not only increase a country's total factor productivity by redeploying product factors, but enhance the country's trade welfare through improving the country's trade term. And in the dynamic process of processing trade structural upgrading, trade welfare will also have further improvement. Based on the theoretical analysis, the paper further considered the present status of our country in the global vertical specialization and the strategic choices that will promote the structural upgrading of Chinese processing trade. The paper considers that, in the long run, China should pay attention to increase the level of participation to the international specialization through processing trade, exert the positive effect of Multi-National Corporations, and promote the dynamic transition of comparative advantage in China.The paper finally analyzes the primary factors that influence the structural upgrading of Chinese processing trade, and finds out that there exists four main factors, i.e. factor endowment condition, technology progress, FDI and domestic industrial structure. Empirical result confirms the influence of these factors, and proposes related policy suggestion.