Study On Upgrading Zhejiang's Industry Clusters Embedded In Global Value Chain With Origin Diversification

Since China's reform and open-up, industry clusters characterized by block economy—one of the effective way of economic development have emerged and developed rapidly in the coastal areas including Zhejiang. However, in recent years, such economic mode has met with serious challenges due to resource shortage, the rapid rise in labor costs, more international trade barriers, and pressure from environmental problems, resulting in the "bottlenecks" of economic development and calling for the upgrade of industry clusters. Thus, it's of vital importance to explore and study the sustainable development of internal mechanism and upgrading paths of industry clusters.There are two basic ideas to study the upgrade of industry clusters. One is to upgrade them within the clusters themselves by further tapping the local resources. The other is to upgrade them with global value chain (GVC) by integrating resources vertically. For a long time numerous researches conducted with the former idea have studied the development of industry clusters based on the integration of local resources, without breaking down the development barriers to industry clusters: the unsustainable development of the endowment advantages of the basic elements characterized by rich natural resources, relatively low labor costs or cheap land; the lack of powerful external pull of the regional innovation system; the extensive type economic development at the cost of the heavy consumption of resources and environmental damages; little room for the value increase of manufacturing-dominated industry clusters stuck in an awkward situation of "being big but weak." In recent years, with the introduction of the concept of GVC, the researches conducted with the latter idea have become an important part of upgrading China's industry clusters. Quite a number of research results have proposed the prospects of upgrading and the upgrading path by analyzing the extent to which industry clusters are embedded in GVC. However, none of the researches with the second idea has ever explored the upgrade of the industry clusters embedded in GVC with origin diversification by building overseas production bases(with an analysis of rules of origin of regional trade agreement (RTA) in implementing origin diversification).On account of the above-mentioned, the paper studies the sustainable development and leaping upgrade of Zhejiang industry clusters embedded in GVC with origin diversification so as to find an effective solution to the development of industry clusters both in theory and in practice.The ideas of "embedded in GVC" and "origin diversification" run through this paper. Firstly, the paper comments on the related theory of GVC and industry upgrade in theory, elaborates on the evolution of Zhejiang industry clusters in the climate of GVC and concludes the basic modes of Zhejiang industry clusters embedded in GVC with the theory of value chain. Secondly, the paper analyzes the dynamic evolutionary relationship between the GVC system and OEM enterprise upgrade and puts forward the upgrade mechanism of Zhejiang OEM enterprises embedded in GVC and the upgrading paths of Zhejiang industry clusters embedded in GVC. On one hand, the effective and feasible upgrading path for Zhejiang industry clusters is to follow the GVC law so as to boost the upgrade of Zhejiang industry clusters; to upgrade Zhejiang industry clusters with the prerequisite of perfecting local value chain system; to upgrade technique and product so as to upgrade function and value chain. On the other hand, the path for Zhejiang industry clusters is to upgrade them with origin diversification; to analyze the position industry clusters take in GVC by globalizing the outsourcing of low added value business. After choosing suitable countries or regions and building overseas production bases to shift surplus capacity and low-end production links, the provincial headquarters will be in charge of the high-end production links, and expand the research and develop and marketing ability so as to effectively improve the ranking of the leading industries in GVC and to upgrade the industry clusters. The paper proposes four paths to upgrade industry clusters with origin diversification based on the different ways to embed industry clusters in GVC. Lastly, taking the textile clothing industry as example and introducing the concept of rules of origin of regional trade agreement (RTA), the paper sheds light on the guiding role the rules of origin of RTA play in origin diversification. Based on the analysis of textile clothing industry value chain and global product networks, and on the interpretation of textile products clauses of RTA (taking the textile products agreement of U.S.—DR—CAFTA as example), the paper proposes the coping strategy of upgrading Zhejiang textile clothing industry clusters with origin diversification based on RTA.In the empirical study, the paper analyses the development status of overseas Zhejiang manufacturing enterprises and the questionnaire results of overseas Zhejiang enterprises. With the firsthand materials of Zhejiang origin diversification, the paper proposes the overall upgrading strategy, path, choices of industry or region for Zhejiang industry clusters with origin diversification and makes several policy suggestions.In the theoretical study, based on the theory of economic geography and related principles of regional economy, industry economy, international trade study, and management science, and the analysis of value chain, the paper elaborates on the upgrading mechanism and ways of Zhejiang industry clusters embedded in GVC. The empirical study of the paper studies the textile industry embedded in the "buyer-motivated" GVC which fully reflects the uneven distribution of profits in GVC. The more integrated the value chain, the bigger the upgrading chances. Based on the analysis of rules of origin of RTA and US—DR—CAFTA which was then about to implement the author showed great concern for during his two-month study as a visiting scholar at Carleton University(Canada), the paper explores the chances and challenges US—DR—CAFTA brings to China's textile clothing industry. To analyze the realistic foundation and restrictive factors in implementing origin diversification in Zhejiang province, the paper digs into a large amount of data of the overseas investment approval system of Zhejiang Bureau of Foreign Trade and Economic Cooperation, and analyzes at great length the development status of overseas manufacturers, which ensures the authenticity and validity of basic materials. In addition, the paper is assisted by Hangzhou Division, Wenzhou Division and Taizhou Division of Foreign Trade and Economic Cooperation and 300 questionnaires of overseas enterprises, of which 137 were valid, and the paper got its abundant firsthand materials of overseas Zhejiang production bases when the author did spot investigations in Thailand, Viet Nam and Pakistan.The paper consists of two parts. The first five chapters are devoted to the theoretical study of the paper and the sixth chapter is the empirical study of the paper.Chapter I Introduction raises the core problem of the paper and discusses the significance of the selected topic and the research methods and research framework.Chapter Two Literature Review defines the four GVC-related concepts of value chain, global commodity chain, global value chain and global product networks and reviews the theory of embedding modes of industry clusters in GVC, the theory of upgrading industry clusters embedded in GVC and the theory of origin diversification.Chapter Three The Basic Situation of Zhejiang Industry Clusters Embedded in GVC comments on the development status of Zhejiang industry clusters and discusses the evolutionary relationship between GVC and Zhejiang industry clusters with the analysis of the internationalization process of Zhejiang industry clusters. The chapter judges the modes and extent of Zhejiang industry clusters embedded in GVC by referring to the related theory of GVC.Chapter Four The Upgrading Mechanism and Ways for Zhejiang Industry Clusters Embedded in GVC, the main part of the theoretical study, constructs the theoretical framework for upgrading Zhejiang industry clusters embedded in GVC. With the analysis of the dynamic evolutionary relationship between GVC system and OEM upgrading within the industry clusters, this chapter puts forward the upgrading path for the OEMs embedded in GVC, on the basis of which this chapter further discusses the upgrading mechanism and ways for Zhejiang industry clusters embedded in GVC.Chapter Five The Upgrading of Zhejiang Industry Clusters with Origin Diversification analyses the realistic foundation of implementing origin diversification in Zhejiang industry clusters and proposes the overall upgrading strategy, path, choices of industry or region for Zhejiang industry clusters with origin diversification and makes several policy suggestions.Chapter Six Origin Diversification Based On RTA—Taking Textile Clothing Industry as Example sheds light on the guiding role the rules of origin of RTA on origin diversification with the introduction of the concept of rules of origin of RTA, taking the textile clothing industry as example. Based on the analysis of the textile clothing industry value chain and global product networks, and on the interpretation of textile products clauses of RTA (taking the textile agreement of U.S.—DR—CAFTA as example), this chapter proposes the coping strategy of upgrading Zhejiang textile clothing industry clusters with origin diversification based on RTA.The end of the research paper is Conclusion which concludes the main results of the paper and raises some points to be thought of for further research.