Research On Accepting Outsourcing's Effect On Upgrading Of Chinese Industrial Structure

On the background of industrial globalization today, outsourcing,being a typical form of the Intra-product Specialization, is an effective approach for China to absorb international industry transfer and accomplish domestic industrial upgrading. Based on this concept, the article analyzes the upgrading mechanism of outsourcing on China's industries and introduces an intra-product model to demonstrate the promotional effect of outsourcing on one country's industrial upgrading. Meanwhile, it carries on an empirical test, and further discusses the factors which have affected China to accept international outsourcing.By analyzing the mechanism and channel through which the international outsourcing having effect on industrial upgrading , the article systematically promulgates that international outsourcing plays an important role in developing countries utilizing their comparison superiority , increasing productivity and enhancing industrial technical level. Based on the intra-product model by Feenstra and Hanson (1996), the Continuum of Inputs Model, the article analyzes that how outsourcing can help participating countries to achieve "dynamic climbing" in the global value chain and then it manifests the promotional effect of outsourcing on industrial upgrading. On the basis of Chinese inter-provincial kneading board data, the article selects the outsourcing and factor denseness data , and uses an econometrical model to examine this effect of promotion. The results indicate that outsourcing stimulates Chinese domestic industry, but the effect is not remarkable, which also reflects the current condition of low domestic value-added rate and short industrial chain link in the outsourcing industry.The article further analyzes and discusses the factors affecting our country to accept outsourcing businesses, including: Infrastructure, industrial development level, transaction costs, foreign direct investment, human capital, technology advancement and average wages, and it carries on an empirical test. Because of unbalanced development, different areas differ a lot in the ability to absorb international outsourcing. This also indicates that outsourcing industry has great potential in China, and its benefits have not become apparent yet. Finally, the article attempts to give suggestions on strategies and policies of speeding up the development of outsourcing industry and promoting domestic industrial upgrading in China.