China's Manufacturing Industry In The Global Value Chain Upgrade

Since the late 20th century to the beginning 21st century, the international division of labor model of significant changes have taken place to reflect a global scope and use of resources to effectively integerate. With the aggravating competition, multinationals increasingly felt that it was difficult to deal with fierce competition effectively on their own strength, and is adjusting their development strategies, such as low-end processing and assembly areas will be outsourced to retain the most competitive process, which are core resources including the most lucrative research and development, brand, service, marketing channels. The global value chain is the best theory to explain the current pattern of this division. Global value chain integration is the starting point:â‘ comparative advantages enterprises can be good to their abilities among the respective links;â‘¡"refocusing" trend make enterprises focusing on key links, the core business operation, and non-critical links and non-core businesses are subcontracted. Developing countries not only have cheap labors, abundant resources, but also a pressing desire to develop their economies. So developed countries distribut manufacturing and processing sectors to the developing world which are benefit least, the consumption of resources, and they are mainly engaged in R&D, product which is a early period of technological innovation, marketing links, and so as to grab high-value monopoly profits and economic rents, so formate the situation which developed countries control developing countries.As China's integration into the global value chain in the breadth and on the depth deeply, china's manufacturing industry has acquired of the great achievements and effect is strengthing on world's economics. But at the same we must see clearly that our manufacturing industry is at the end of global value chains. How to explain the phenomenon and how to solve problem are becoming cutting-edge issues which the current domestic and foreign scholars and policy-makers are very concerned about. From the existing literature about the global value chain theory, the global value chain and its overview of the basic theory of governance, global value chains and industry clusters, global value chains and local industry networks, global value chains and industrial upgrading have been studied, and these helped Chinese scholars and business research to theory strong a profound and comprehensive understanding for global value chain, but it can be seen from these studies that needs to be further strengthened combined with China's reality.This paper is Sub-topics of the Ministry of Education "the International Financial Crisis Responsing Study" emergency issues "Under the International Financial Crisis Environment, Accelerating the Construction of our Manufacturing System Countermeasures Research" (approval number:2009JYJR047) and 211â…¢key projects "China's Industrial Development and Innovation of Science"(approval number:211XK06).According to the international division of labor theory and the global value chain theory, this paper's proposition designed to address four major issues, namely: causes of China's manufacturing industry in the global value chain position; factors affecting manufacturing upgrading in China; upgrading path for China's manufacturing industry; China's manufacturing industry upgrading mechanism. These four issues interlock logically and levely, and can set out basic problems in China's manufacturing industry under global value chain.Expanding this proposition, this article first through the RCA index, IIT index, VAR index of China's manufacturing industry in the global value chain, judged the location and concluded that China's manufacturing industry as a whole in the middle-competitive, and despite the growth of processing trade value, not high status in the global value chain, and the lower end of the division of labor.Through a large number of statistical data analysis and comparison from domestic and abroad, author believe that the main reasons are four imbalance:â‘ imbalance of the structure of trade growth;â‘¡imbalance of Energy, the environment for sustainable development;â‘¢imbalance of services development;â‘£imbalance of technological innovation on industry upgrading support. Factors of future constraining:â‘ comparative cost advantages gradually will disappear;â‘¡locking their own development path. In this context upgrading of China's manufacturing industry is inevitable and progressive. But the upgrading process is not conducted in isolation, and it's a systematic project. Industrial upgrading is affected by the technical capacity and supplying high-level human capital factors such as endogenous factors and the development of produce services, global value chain governance model, policies systems and international trade exogenous factors, and it's strengthen the power source to upgrade for the interdependence between the elements.Expanding the view of Humphrey and Schmitz on industrial upgrading in four ways and combined with the actual development of Chinese manufacturing, author proposed upgrading of the same product division of the chain, upgrading of product structure of the same industry, upgrading of factor intensity of different industries. Finally proposed innovative mechanisms to upgrade our manufacturing design system through theoretical model and empirical analysis.This paper uses mathematical statistics, empirical research and cross-research methods to analyze upgrading of our manufacturing basic proposition from the perspective of the global value chain. The main innovation is following:Firstly, combined with Humphrey and Schmitz's, Porter's, Gereffi's, and Poon's views, author discussed many ways to upgrade:â‘ upgrading of the product division of the same chain;â‘¡upgrading of product structure of the same industry;â‘¢upgrading of different factor intensity of different industries, and these three methods are interrelated upgrade. Combined with our national conditions, exogenous type upgrading path takes upgrading of the product division of the same chain, and endogenous type upgrading path can taken the three methods to upgradeSecondly, as reference to Feenstra and Hanson (1995) model, in this model system variable will be considered, and by deducing the conclusion is that technical level of the developing countries surpass developed countries relatively and systems to improve will bring to positions of the two ends of the value chain extension. Compared with foreign enterprises, traditional industries in our country does not have the advantage, and through the strategy new industries, we can build our lead in the global value chain by technology leading.Thirdly, selecting 31 provinces 8 years of panel datas examines technological innovation and institutional innovation mechanism of China's manufacturing industry by measuring test. Compared with the existing literature, mainly there are the following advantages:â‘ the different provinces (regions) that may exist unobserved heterogeneity between the different natural and geographical conditions, historical background. Once these heterogeneous are related to independent variables vector and errors, it will lead to bias regression results, and the model will occur endogeneity problem because of the default variable. These heterogeneity in the fixed effects model, were lost the first difference, and together in this study estimated the random effects model allowing a more robust regression results of this paper;â‘¡China's provincial-level fixed effects on panel data analysis can effectively expand the sample size, and thus meet the large sample in statistics on the progressive nature, and the empirical analysis will be more credible.