Study On The Impacts Of Changes Of Overall Cost To Industrial Upgrading

Yangtze River Delta(YRD) region is one of the most developed and dynamic regions in China. From 2002 to 2012,significant changes of the overall cost and the level of the industrial development have taken place in YRD region. This paper analyzes the relationship between industrial upgrading and the changes of overall cost of 11 cities of YRD to provide a theoretical reference for government and enterprises to correctly handle changes in overall costs and take appropriate measures to promote industrial upgrading.This paper briefly defines the concepts of industrial upgrading and overall cost. This paper believes that industrial upgrading should be defined from GVC perspective. Industrial upgrading refers to various industries of a country or region to climb across the global value chains or to the high value sectors of GVC. The overall cost is all the costs a typical enterprise should spend during the producing process in certain area, including costs of productive factors and non-productive factors. This paper argues that the rise of city’s overall cost would make low-value industries within the region move out and high value industries develop further then enhance the industrial development. Industrial development will improve the soft environment and make further concentration of high value industries, making industrial development of the city enhance further. Then this paper selects 11 typical cities of YRD, including Shanghai, Nanjing, Wuxi, Suzhou, Changzhou, Nantong, Yangzhou, Hangzhou, Ningbo, Jiaxing, Huzhou,and analyze their industrial development index, the sub-costs included in overall costs,and overall costs from 2002 to 2012. The results found that in the past decade, industrial development of the selected cities significantly increased, while the overall cost increases too. Subsequently, this paper selected 11 cities 2002-2012 industrial development index, the overall cost index, and real per capita investment in fixed assets to establish the panel model, empirical results show that the increasement of overall cost of selected Yangtze River Delta cities has a positive effect to industrial upgrading. This effect in the core and the center cities is more significant.Finally, based on empirical results, this paper concludes that the overall cost increasement has a positive effect to industrial upgrading in cities of Yangtze River Delta region and make recommendations:Government should reduce the administrative intervention of overall cost, improve the soft environment of the city, make more regional cooperation between cities to promote industrial upgrading; enterprises should take advantage of all the cities,separate their R&D sectors and productive sectors, to make win-win benefits between urban developments.