China’s Position In The Global Value Chain And Analysis Of Upgrade Paths

Based on the total trade flow decomposition framework proposed by Zhi Wang et al. (2013), author used WIOD database to analyze China’s status and development trend in the global value chain from the perspective of value added. And then author introduced structural decomposition analysis (SDA analytical method) to break down factors of domestic value added imbedded in China’s final exports. Finally, author built a dynamic panel data model of influencing factors of a country’s status in global value chain, in order to find effective upgrade paths for China.Author have found that after China joined WTO, although the scale of China’s exports expanded quickly, the proportion of domestic value added imbedded exports kept staying at a low level among 40 countries and continued declining during the past 11 years, mainly due to the demographic dividend gradually shrinking and rising labor costs. Also, four categories of industries had a high proportion of domestic value added imbedded exports, such as labor-intensive manufacturing industries, capital intensive services, capital-intensive manufacturing industries and labor-intensive services. In turn, the proportion of domestic value added imbedded exports in the knowledge-intensive industries (including manufacturing and services) were relatively low, and both showed a clear downward trend. China haven’t narrowing the gap with innovative countries timely in these industries requiring higher technology level.Given China’s long-term processing trade-oriented model, the scale of external demand was the most important factor influencing China’s gains from trade in the global value chain. And the good news is that structural effect of input-output efficiency technology also had a significant effect on China’s domestic added value imbedded exports, suggesting that technical progress has a significant and positive role in promoting China’s upgrade in the global value chain.Three elements (labor, capital and technology) and three external environment variables (trade liberalization, the degree of financial development and fiscal policy efforts) have a significant impact on a country’s position in the global division of labor in the value chain, but only technological progress, the degree of financial development and fiscal policy efforts of the three variables has a positive role. In the future, China need to need to start from the technical elements and financial development, fiscal policy and other external environment in order to improve their position in the global division of labor in the value chain.