Producer Services Development,Manufacturing Competitiveness And Industry Convergence

The transformation of China’s economy during the last thirty years has been remarkable. Manufacturing industries have been at the forefront of the changes that have made China the workshop of the world. However, against a background of non-renewable resource, energy and environmental constraints, the reindustrialization of developed countries in Europe and North America, and a more fragile global economy, manufacturing industries in China are under pressure. There is an urgent need to upgrade and to improve their competitiveness. A group of activities that are key in this respect are producer services that have a "divide but not leave" relationship with manufacturing industry. The even more recent development of producer services has brought vitality and positive energy to enhancing the competitiveness of manufacturing industry. Thus, we cannot analyze the manufacturing competitiveness without a discussion of producer services. This thesis attempts to answer four questions:First, what is the current role of producer services in upgrading manufacturing competitiveness in China? Second, what are the determinants of producer services development in China? Third, what are the best ways to promote producer services with a view to the enhancement of manufacturing competitiveness? Fourth, how can the convergence coefficient between producer services and manufacturing be calculated?A combination of domestic and international research findings are used to construct a classification of producer services and define the essence of manufacturing competitiveness in China. We calculate the efficiency of manufacturing industry using DEA method. Then we analyze the impact of producer services on manufacturing efficiency in China using dynamic panel data analysis methods for20provinces and Zhixiashi from2004to2010. The same dataset is then used to identify some of the determinants of producer services in China by analyzing the demand and supply of producer services, including industry convergence. Then, the paper theoretically analysis the mechanism of producer services to enhance manufacturing competitiveness from the perspective of industry convergence. Based on value chain theory, the convergent driving forces, routes, and model are analyzed. Finally, the foundation of industrial convergence between producer services and manufacturing is analyzed and further calculations made on the coefficient between producer services and manufacturing using the input-output table for China.The results of these analyses are summarized as follows:First, the development of producer services plays a significant role in promoting manufacturing competitiveness in China. The Industrial, Transportation, Storage and Post sub-sectors have the maximum significant influence while Scientific Research, Technical Service and Geologic Prospecting perform a limited role. The development of producer services also plays a significant role in promoting manufacturing competitiveness at the regional level. The development of producer services is the most important determinant of manufacturing efficiency in the east region. It is performs a less prominent role in the central and western regions. It is clear that the development of producer services has promoted labor-intensive, capital-intensive and technology-intensive manufacturing competitiveness, although the greatest impact is on capital-intensive manufacturing and the least impact is on technology-intensive manufacturing.Second, the degree of industrialization has the greatest impact on the development of producer services in China. The degree of specialization and efficiency of producer services promotes their development. Industry convergence contributes to the development of producer services in eastern, central and western regions but the effect is weak. On the other hand, the level of government intervention has a strong relationship with the overall development of producer services. Although manufacturing agglomeration encourages the development of producer services in all the provinces of the eastern region, it has not had this effect in the central and western regions. The degree of economic openness only has significant influence in the eastern region.Third, industry convergence is the effective way to enhance manufacturing competitiveness. Interpenetration, extension and restructuring of the value chains of producer services and manufacturing reflect the convergence of producer services and manufacturing. This convergence is essentially the process of decomposition and reconstruction of the value chains. Producer services relationally converge with primary activities in the manufacturing value chain. This goes beyond the role of the price system in the market and raises operational efficiency by realizing scale economies. The structural converge with supporting activities in manufacturing value chain allocate resources more efficiently by raising the level of specialization. Therefore, producer services can enhance manufacturing competitiveness by improving operational and resources allocation efficiencies.Fourth, the convergence level between producer services and manufacturing is very low. It is not a way of effectively promoting the development of producer services. The degree of convergence between producer services and sub-sectors of manufacturing varies considerably. The maximum convergence coefficient occurs for Oil Processing, Coking and Nuclear Fuel Processing and producer services; the minimum convergence coefficient is found for Smelting and Pressing of Nonferrous Metals. The convergence level between higher order producer services (such as Information Transmission, Computer Services and Software, Scientific Research, Technical Service and Geologic Prospecting) and manufacturing is very low but it is relatively high between traditional producer services and manufacturing. The highest convergence level between producer services and manufacturing is found in Beijing, which is much higher than for the other provinces and Zhixiashi. While there are wide variations in the convergence levels in the30provinces and Zhixiashi, in general the eastern regions show the highest values and the central region the lowest.Finally, on the basis of the preceding conclusions some recommendations for the development of policies designed to enhance the role of producer services in China’s economic development are suggested.This thesis has four innovation points:First, based on the premise that manufacturing competitiveness is derived from manufacturing efficiency; the total factor productivity of manufacturing by using DEA method has been calculated. Second, the convergent driving forces, routes, and model of the producer services and manufacturing relationship are analyzed based on value chain theory. Third, the determinants of the development of producer services are analyzed from the demand and supply of producer services based on corresponding theoretical assumptions. Some important factors i.e. industry convergence which have been overlooked in previous studies are considered. Fourth, the convergence coefficient between producer services and manufacturing industry has been calculated.The thesis identifies two shortages themes that merit further research. First, there is a need to test, measure and better understand the ways in which producer services promote and upgrade the competiveness of manufacturing industries. Second, there is scope for devising new methods for calculating industry convergence levels using micro-level data.