A Quantitative Study Of China's Outsourcing Undertaking And Outsourcing Abroad Under The Background Of Globalization

In recent years along with globalization advancing and the international competition intensing, the offshoring is becoming the product of international division of industry. The Multinational corporation is taking the offshoring as the the important strategic choice of internationalization. China can make a good use of domestic resources and superior resources imported from various foreign countries through outsourcing undertaking and outsourcing abroad,which would surely bring a gathering,demonstration and leading effect on the whole industries. The outsourcing undertaking and the foreign outsourcing are becoming new objectives of China's industry development in the 21st century.With carrying out the reform and open policy gradually since 1980s, China has attracted large quantities of overseas enterprises building plants through FDI, and now China has already became "the whole world's manufacturing center" through the contracting overseas manufacture outsourcing. Since the start of 90s, along with the rapid development of technologies such as networking, the classical trade theory's important supposition which is "the service could not be shifted" is broken, and the service outsourcing has been outstandingly in a vigorous development. Especially after joining WTO in 2001, China is more widely participating in the economic globalization, opening service industries such as bank, insurance and telecommunication and making huge progresses in aspects of intellectual property protection. The service's internationalization becomes a new objective of the economic globalization in the 21st century. In view of the historic opportunity of service outsourcing development, the Chinese government takes seriously "the outsourcing" as the important starting spot of economical second soaring. Then, what is the major factor to affect the developed country's multinational corporations outsourcing abroad to China? Does China make use of outsourcing and develop its strength in order to become the world main outsourcing destination?Along with the advancing of technology and the globalization, a single enterprise cannot own all core resources independently, and in order to realize mutual complement of the information and resources needed in different segments and construct the superiority of market competition, the Chinese Enterprises not only are undertaking outsourcing, but also are participating in the whole world's resource distribution through outsourcing abroad. This kind of foreign outsourcing is different from happened in developed countries from the nature:as a result of the managerial experience and technical ability's insufficiency, the partial core parts of some products still have to be imported from the developed country. But would the foreign outsourcing affect the domestic employment? At the same time, as an effective method to obtain the overseas resources, does China's present foreign outsourcing behavior promote the major industry's labor productivity really?Basing on above backgrounds and summarizing the outstanding researches about outsourcing theories and the application methods by domestic and foreign scholars, this paper starts from the viewpoint of globalization and the international industrial division of labor and innovates contract outsourcing and foreign outsourcing model. Firstly to analyze profoundly the nature of "the outsourcing" as a new phenomenon of economic globalization; Secondly to apply the Feenstra's outsourcing model and the HOV model to carry on the mathematical inferential reasoning and simulation analysis of the China's manufacture outsourcing and service outsourcing behavior and quantify the influences of such factors as imported proportion of middle input, RCA, the resource endowment, the labor productivity and the economies of scale on contracting outsourcing behavior; Thirdly to apply Amity and Wei's outsourcing model and Cobb-Douglas production function to analyze China's foreign outsourcing behavior and quantify OSS and OSM behaviors'influences on major industries' employment and labor productivity; Finally to propose some valuable suggestions to support government on proper outsourcing policies to promote industry modernization.This paper includes the following main research works:i. Overcoming the difficulties of data mining, to utilize different databases when carrying on the scientific analysisBecause of huge workload of the data statistics and the computation, domestic literatures in public are lacking outsourcing's empirical studies and researches. This paper gathers the data from various resources such as China's Input-Output Table, domestic various kinds of statistics yearbooks (e.g. Industrial Statistics, Population and Employment Statistics, Fixed Asset Investment Statistics, International Trade Statistics and so on), some developed countries'yearbook (e.g. Japan and some European major countries'industrial statistics annual), and International organization's database(e.g. OECD, UN, IMF, WTO, EU and so on) to forms the science, complete and unified statistics foundation.ii. Basing on comparative advantage theory and outsourcing theory, to apply Panel Data methods to analyze the influence mechanism of China's contracting manufacturing outsourcingThis paper takes Feenstra's outsourcing model as a basis, select China's the closest outsourcing partner Japan as the outsourcer (China as insoucer) and apply Panel Data to carry on a empirical analysis for China's key factors influencing Japan's outsourcing manufacturing activities from 1989 to 2006. The conclusion is as follows:(1)Japan's the middle input proportion of imported from China and China's revealed comparative advantage are identified as the main influencing factors of outsourcing behaviors.(2)The resource endowment as well as the labor productivity is also obviously affecting the China's outsourcing-undertaking.(3)Though the economies of scale are also a remarkable variable, the economies of scale will delay the entire outsourcing-undertaking's growth speed to some extent.(4)After sampling the labor intensive and the capital/technology intensive industries, It is discovered that the resources endowment and the labor productivity are not remarkable factors to the labor intensive industry group though remarkable to the latter group.So we need still focus on the technology and productivity enhancement of the labor intensive industries, with the aim of consolidating and strengthening its leading position of world manufacturing industries. On the other hand, China needs gradually adjust industry policy, encourage the capital/technology-intensive industry to raise the labor productivity through technology and automated machine's usage, with the aim of enhancing these industries'competitive advantage.iii. Basing on HOV model to apply Panel Data method to analyze key factors influencing China's outsourcing-undertaking of foreign service activitiesThis paper follows the models Trefler created in 1993 and Learner 1995 basing on HOV theorem and infers the theoretical empirical model of influencing outsourcing-undertaking service activities. After overcoming the difficulties of data statistics and tedious computation, I carry on the empirical analysis regarding the main countries undertaking service's influencing mechanism in 4th chapter. The findings are as follows:(1)It is discovered that the human resources talent, the real exchange rate, the internet usage proportion and economical freedom degree are four remarkable variables influencing service insoucing.(2)For most non-developed countries, economical freedom degree and human resources talent are especially important, and if to raise 1% each, the service outsourcing undertaking will be grown by 1.17% and 0.76%.(3)Internet usage proportion and the economic growth are poor variables to affect outsoucing-undertaking.(4)In addition, if the real exchange rate rises by 1%, service outsourcing-undertaking will be reduced by 0.64%. Therefore, we need pay attention to the negative affecting power of the real exchange rate's increase for insoucing service.Therefore China's higher education level will lay the solid foundation for the outsourcing industry. The powerful policy support is the important factor to promote the fast development of Chinese service outsourcing industry. And we can continue to refer to the developed country's legislation framework about the trade in services. At the same time, the sudden exchange rate rise with a big proportion and price upwards will inevitably have the adverse effect on the outsourcing's development, the government should pay attention to the real exchange rate and adopt the necessary financial method to hold down the surprise rise.iv. To combine Cobb-Douglas function with mainstream outsourcing model to analyze the influencing mechanism of China's foreign outsourcing activities on major industries'employmentThe China foreign outsourcing has the profound significance for the industrial adjustment, the economic reform and the employment situation. The stable employment situation is the major issue relating with the national economy and the people's livelihood. Basing on Amityå’ŒWei and Cobb-Douglas model, this paper makes use of data from China 1997,2000,2002 and 2005 Input-Output Tables and applies panel data method to analyze the influence of China 17 industries'foreign outsourcing on employment. The conclusions are as follows:(1) The service outsourcing is a remarkable variable to affect negatively China's employment, and the service outsourcing has a stronger influence power surpassing the material outsourcing to the employment.(2) The sample data shows that the service outsourcing ratio is still a remarkable factor affecting the employment, but the material outsourcing ratio is not a remarkable factor influencing the employment. So the material outsourcing can not be determined surely as a remarkable variable to influence employment(3) From different industries'variable coefficient regression equation, we see that as the service industries outsourced most these years internationally, the financialå’Œinsurance, transportation, postå’Œtelecommunications industry and commercial service industry have the bigger outsourcing influence coefficients than other industries. This indicates that though our country service outsourcing-undertaking is still at the initial stage, it has already begun to influence domestic employment.Therefore the promotion of service quality and enhancement of the domestic product's high added value as well as the brand superiority have been already the primary mission of China's all industries.v. To apply panel data model to analyze the positive influencing mechanism of China's foreign outsourcing activities on major industries'labor productivityThe outsourcing will change the product composition or the structure, thus this positive change will promote industry production's enhancement. The sixth chapter applies Amity and Wei's method to construct the influencing factor model of China industry's labor productivity. The main conclusions are as follows:(4) The service outsourcing has a remarkable promotion effect on the labor productivity, but the material outsourcing is not remarkable to affect the labor productivity.(5) After sampling for further analysis on the industry level, the service outsourcing has a positive promotion action on all industries'labor productivity, but the material outsourcing can have a positive influence only on the agriculture, mining and manufacturing industries and little influence on the service industry.Therefore we should measure the service outsourcing's positive and negative effect on employment and labor productivity and analyzes risks and competition challenges will be faced with under the different choices, with the aim of making the service outsourcing beneficial to our industry development. The industrial policy should be stressed on core parts'shift of being strategic significance through providing some preferential benefits and closer cooperation with the foreign advanced enterprise with special technology and service advantage.This paper includes the following innovation points:i. The core question of empirical analysis is how to measure precisely outsourcing. The domestic and foreign scholars have applied the different techniques to measure outsourcing. The Pioneering works by Lawrence and Slaughter (1993) have been followed by Feenstra and Hanson(1996a), Hijzen, Gorg and Hine (2005), Ekholm and Hakkala (2006), OECD (2007), Ahn, Fukao and Ito (2008) and Xu Yi and Zhang Erzhen(2008). This paper reasonably applies different measurements to forecast the trends of China outsourcing behaviors. With a multi-angle view of the nature, measurements and characteristic of outsourcing under economic globalization background, the reasonable measurements can be done more scientifically before further analysis.ii. The payroll cost, the resources, technical as well as policy support are key factors influencing multinational corporations from developed countries to outsource their middle parts to the developing countries. Overall, the existing foreign literature mainly analyzes from the developed country's angle of view multinational corporations implementing outsourcing. And very few domestic research carries on the empirical analysis basing on industry level as a result of the data limitation. This paper is from the angle of outsourcing destination and viewpoint of international globalization industrial division under economic globalization, combining the traditional trade theory with modern trade theory to propose the factor model of influencing the undertaking of international manufacturing outsourcing in China, and performing a complete and thorough empirical analysis after digging proactively data, combination of industry data and constructing panel data on industry's level.iii. In recent years, the domestic and foreign scholars have conducted a very thorough researches on the factor analysis of influencing the service outsourcing. However, only a few existing literature carries on the key factor analysis from the developing country's perspective. This paper constructs a logic-strictly analysis framework, which is to follow the model created by Trefler(1993) and Leamer(1995), propose the theoretical model of influencing the undertaking of service outsourcing, overcome the difficulties of data statistics and the tedious computation and carries on the empirical analysis from country level regarding influencing factors of the main countries developing service outsourcing as a important innovation.iv. Most literatures are taking developing countries as the outsourcing's destination and very few literature put efforts on researches about the developing countries'outsourcing abroad activities. This paper applies Amity and Wei's outsourcing model combined with the Cobb-Douglas production function to analyze Chinese major industries'overseas shift's influences effecting domestic employment and labor productivity.Because of the outsourcing domain's research being at the initial stage in China and limitation of my knowledge and time, this paper is still not entirely at a desired place and still has some room to be further improved in aspects of theory and model construction.