Products Within The International Division Of Labor With China's Industrial Upgrade

Global economic integration is an irresistible trend, and no country can be immune to it, so every country should consider how to survive and develop in this wave of globalization. Production internationalization and trade liberalization, as two important carriers of economic globalization, interact with each other and promote global economic integration together. Along with the accelerated globalization and technological progress, the traditional nature of international trade and cooperation model of international production are undergoing profound changes. The cooperation model that one country produces one product from the stage of raw materials to the stage of end products does no longer meet the demand of globalization. Instead, several countries go through different producing process of one product according to their own advantages. Correspondently, international trade is transforming from inter-industry trade to intra-industry trade to intra-product trade which leads to a big change of the international division. Each country or region has its own cost and benefit along the value chain of the international intra-product trade, so the new system of international division with two important elements– work stage and time sharing is finally formed.China is participating in the international intra-product trade, and it should make the best of the opportunity of the transformation of the international specialization to clime up to a higher level of the vertical specialization. In this process, labor intensified economy should transformed into technology oriented one, and industry upgrading should be accelerated in China.The paper is divided into the following six parts. The first part is an introduction of the background and significance of the research. I also make an overview of the related papers at home and abroad and brief the innovative thoughts and structure of the paper.The second part summarizes the theory of international specialization, which is a research basis of the following parts. The history of Intra-industry trade and intra-product trade are particularly presented here. Then I elaborate the new theory of international trade - vertical specialization and the concept of the vertical specialization of products, that is, the intra-product specialization.The third part analyzes the incentives of the international division in order to make a better understand of intra-product division. Intra-product specialization is actually the extension of Intra-industry trade, so the theory to explain the latter can be taken over to analyze the reasons for the former. It is concluded that advantages and scale economy are two main reasons for the international intra-product specialization.The fourth part analyzes the three effects of international intra-product division: interest allocation, technology diffusion and human recourses development. The technology of foreign enterprises in China is generally higher than the native ones, which is a necessary condition for the technology diffusion in the international intra-product division. Its effect is reflected by their technological support of the equipment and facilities in China, while the diffusion effect of China's human resources is caused by the skill training of the employees in the international intra-product specialization. The fifth part elaborates the current situation of China's participation in the international intra-product trade, China's major industries and trading partners involved in the vertical specialization and China's main body within the intra-industry trade respectively.The sixth part makes a policy suggestion for the development of international intra-product trade in China. As Chinese enterprises'participation in the international division is currently at a lower level, the government should make bigger investment to support product innovation and the "going out" initiative.