A Study On Processing Trade's Upgrading In Value Chain Under Intra-product Specialization

Processing trade termed a way for developing countries to participate in global intra-product specialization. It is considered by many economists to be a new road of industrialization. However, research also show that developing countries engaged in processing trade could be easly locked in the low-end part of global value chain. Therefore, having its processing trade upgraded in value chain is essencial for a developing countrie's industrialization.In China, processing trade has played a dominating role in its reform and opening up process, meanwhile it also shows characteristics of low value-added production. Since the global financial crisis started in2007, there has been obvious evidence of the fragility of China's processing trade. Under these circumstances, conducting quantitative research on processing trade's upgrading in value chain is of great theoretical and practical significance.Chapter1of this dissertation provides a brief introduction. Chapter2is concerned with theories of intra-product specialization's effect and developing countries'upgrading in value chain. In Chapter3, the author first incorperates foreign direct investment, R&D expenditure and manufacturing base in the theoretical model of developing countries'processing trade upgrading, then constructs CIC indicator to measure the upgrading status of13sample developing countries from1992to2007and conducts empirical research to test theoretical hypothesis. After the theoretical model in Chapter3is supported by international empirical evidence and a statistical overview of China's processing trade and its upgrading reality, the author puts forward in Chapter5,6,7the theoretical hypothesis of upgrading in value chain for respectively China's labor-intensive, capital-intensive and high-technology intensive processing trade, constructs a panel data model with data of31provinces and municipalities from2002to2007and estimates with Gneralized Moment Method, to reveal characteristics of different factro-intensive processing trade in value chain upgrading and lay out industrial policy recommendations. Chapter8presents a summary of findings.The international empirical study of this dissertation finds that developing countries'processing trade upgrading in value chain is mostly driven by manufacturing base and R&D expenditure. In addition, extra-low quality of institutional environment will hinder a country's processing trade in the value chain upgrading, but after the average level is reached, higher quality of institutional environment can only promoting the upgrading process with enhanced manufacturing base and R&D expenditure as a precondition.The empirical study of China's three different factro-intensive processing trade shows that:For China's labor-intensive processing trade, the upgrading process in value chain is mostly driven by factors of human capital and foreign direct investment; For China's capital-intensive processing trade, R&D expenditure, participating in intra-product specialization, manufacturing base and human capital play the dominating role; while for China's tech-intensive processing trade, human capital and manufacturing base stimulate the upgrading process mainly. Becides, empirical results also indicate that the overvaluation of RMB since2005has positive effect on the upgrading process of China's labor-intensive and capital-intensive processing trade, while its influence on tech-intensive processing trade in not significant.