China’s Opening Up Trade In Services And Moving Up The Global Value Chain

Global value chain, a new feature of economic globalization, reflects a new trend in the current international trade and division of labor. On a micro level, it performs as enterprises globalizing numerous segments of value chain through the cross-border investment or outsourcing and connecting the scattered production process through international trade. On the international trade level, it behaves like steering from the final goods trade to the intermediate goods trade and from the traded for consumption to traded for production. With respect to the international division of labor, it shows the transaction of the basis of specialization from a particular industry or a product into one segment in the value chain. From the production-tissue-decomposition-scale point of view, the manufacturing industry occupies a major part in the global value chain development pattern. There are two important feature trends in the structure of manufacturing global value chain. On one hand, the article decomposes the structure of global value chain according to the country. Therefore, the value structure of exports goods can be divided into value created by domestic and foreign activities. Comparing these two kinds of value, it can be found that the relative ratio of foreign value in the structure of manufacturing value has been rising while the domestic value has been declining. On the other hand, the article decomposes the structure of global value chain according to the department. The value structure of exports can be divided into the value produced by manufacturing and service sector activities, which can be referred to as manufacturing value and service value. Comparing these two kinds of value, it can be found that the relative ratio of service value in the structure of manufacturing value has been rising while the manufacturing value has been declining. Not only is the ratio of foreign value, service value in the structure of global value chain has increased, but also the combination of both. This paper further studies the mechanism that openness of services affecting a country’s manufacturing international trade and division of labor status. Services improve the competitiveness of firms through two mechanisms, namely specialization and knowledge technology introduction. Costs reduction, product differentiation, and promoting the construction and integration in global value chains of firms can all help to improve the competitiveness of manufacturing enterprises. At the national level, according to the three services imported, the article discusses three models to explain how openness of international trade can have impacts on the manufacturing division of labor model. Additionally, it finds out that under the circumstances of global value chain, how imports of services introduced by openness can bring about the dynamic upgradation of industrialization and manufacturing status. When it comes to empirical studies, this paper uses WIOD accounting database of global value chains to obtain a continuous period of transnational global manufacturing value chain structure data; uses quantitative methods analyzing the impacts of foreign service value on the upgradation of manufacturing within the structure of the global value chain; considers effects of foreign service value in each specific service sectors. The results show that the service sector which has large proportion of value within the manufacturing value chain structure might not necessarily contribute most to the upgradation of status in the manufacturing global value chain. Furthermore, Collaborative openness has more outstanding effects than opening of just one sector. Overall, business services and financial services have the most significant effects. Finally, the article considers the effects on the status of global value chain from different service sectors and barriers. The article uses the STRI data from World Bank and the STRD database of OECD to summarize the status quo of China’s current service trade barriers and uses STRI index and their classification measures indicators to analyze the impact of various kinds of barriers on the enhancement of the global value chain. The results show that trade barriers in different departments have different effects. Some service sectors have small proportion in the manufacturing global value chain structure while its barrier measures may have large effects. Some services trade barriers, although not the focus of the current rules of international trade negotiations, but for the global value chain position significantly affected. Some services trade barriers have negative effects on foreign service providers, while they might be beneficial to their status promotion of global value chains.