GVCs And The Impact Of FDI On China’s Value-added Export

With the rapid development of globalization since the 1990 s,the international production mode as described by global value chain has becoming prevalent.MNEs are generally recognized as important players in the global economy and the main cause driving the increasing prevalence of international production segmentation in the form of global value chains.investment and trade nexus has been discussed in detail regards to international production networks of MNEs,which is often seen as two sides of a coin.While Previous policy implications with respect to the complementarity between trade and investment remain relevant,trade and investment seem to be intertwined in a more complex manner within GVCs.MNEs are best described as networks within networks.A network of affiliates serving different purposes within the MNE,inserted in a broader production network described as the “global value chain.Value-added Export and national value-added export are two important and closely related perspectives to examine the impact of FDI on export.A review of existing studies shows that studies from both perspectives have attracted great attention,but there are few literatures that systematically study the impact of FDI on China’s export by combining the perspectives of value-added export and national value-added export.The influence of FDI on value-added export and national value-added export does not exist independently,but the influence of different dimensions brought by the embedment of MNEs into Chinese economy and the embedment of Chinese economy into global value chain.In the era of turbulent international situation and differentiation risk of global value chain,a systematic analysis of FDI’s impact on China’s added-value export is of great significance for China to implement the domestic and international dual circulation development strategy.This paper mainly analyzes the impact of FDI on China’s value-added export from the following aspects.First,based on the evolution of FDI and China’s value-added export and stylized facts of FDI embedding in China’s economy and China’s economy embedding in the world economy are presented.Second,building a enterprise production model within GVCs,incorporating imported intermediate products and domestic intermediate products relative quality factor,analyzes the causes of domestic value-added rate.Combining stylized facts of embedding of FDI in China’s economy and recognition that FDI is " a package of factors and MNEs are best described as networks within networks,this paper analyzes the macroeconomic mechanism of FDI’s impact on China’s valueadded export in detail.Third,in order to quantify the impact of FDI on China’s valueadded export,this paper uses WIOD2016 and ADBMRIO2019 value added trade accounting datasets provided by RIGVC UIBE to construct a panel model from the perspective of value-added export structure.GMM method is used to quantitatively test the time-variability and heterogeneity of the impact of FDI on China’s value-added export structure.Fourth,further research of impact of FDI on China’s national valueadded export uses both China’s industrial enterprise databases,Chinese customs trade database and the OECD-AMNE database,combining the two calculation results to confirm each other.The impact of MNEs on China’s national value-added export is evaluated.Based on the theoretical and empirical analysis of this paper,the main research conclusions are as follows:(1)The complex impact of FDI on China’s value-added export has an inherent consistent economic logic.Both micro and macro mechanism analyses support that "imported intermediate goods" and "technological innovation" are the important channels through which FDI affects China’s value-added export.The implications of the enterprise production model show that the imported intermediate goods are conducive to the increase of the domestic value added rate by indirectly improving the quality of domestic intermediate goods,while the technological innovation is conducive to the increase of the domestic value added rate by the enterprise cost-plus.From the perspectives of capital,technology and production attributes of FDI and embedment of FDI into China’s economy by factor,agglomeration and GVVs dimensions.This paper presents the internal relationship between FDI’s influence on China’s value-added export structure and national value-added export,rather than just the progression of data accounting methods.In other words,FDI directly affects national value-added export rate by participating in factor allocation mainly based on capital attributes.Value-added export structure is affected by the complex dynamic mechanism brought by production and technological attributes,through agglomeration embedment and GVCs embedment,Mechanism analysis shows that,in general,the complex dynamic impact of FDI on China’s export value added structure is manifested in the early stage of static impact,the dominant stage of demonstration effect under the channel of imported intermediate goods and the dominant stage of competition effect under the channel of technological innovation.(2)FDI has an impact on strengthening the processing trade characteristics of China’s value-added export,though is gradually weakening in time trend.Moreover,the impact on value-added export is heterogeneous at the industry level,and there is a " locked-in" effect on China’s highly R&D intensive industries.The empirical test results support the theoretical analysis of the impact of FDI on China’s value-added export.FDI is conducive to the increase of the proportion of domestic value added exported through the final product channel,thus strengthening the processing trade characteristics of China’s export,but this effect has been gradually weakening since 2000.In terms of heterogeneity,FDI has a certain positive impact on the proportion of domestic value added exported through intermediate goods channel and the proportion of domestic value added returned to China in medium and low R&D intensive industries and medium and R&D intensive industries,but has a greater positive impact on the proportion of domestic value added exported through final goods channel in high R&D intensive industries.This indicates that FDI has a "locked-in" effect on China’s highly R&D intensive industries.The empirical test results also shows that imported intermediate goods and technological innovation are two important channels through which FDI influences the value-added export structure of China.Imported intermediate goods and technological innovation can weaken the effect of FDI on the processing trade characteristics of China’s export.(3)Activities of MNEs in China cause a deviation of about 9%～15% between value-added export and national value-added export in China.Although there are differences in the results between the micro-industrial value-added accounting method and the input-output accounting method based on the OECD-AMNE data accounting method,both of them show a downward trend in time.The industry heterogeneity analysis of the two accounting methods shows that the deviation degree of foreign enterprises in medium and low R&D intensive industries is low,and the deviation degree in medium and high R&D intensive industries is high,especially for foreign processing enterprises in high R&D intensive industries.In addition,the results of micro industrial added value accounting method also found that the deviation degree of processing trade enterprises,enterprises with larger scale,and enterprises with larger export scale is higher.Based on the GDP accounting method classifying domestic and foreign enterprises based on the OECD-AMNE database,it is also found that foreign enterprises account for 15% of the total value added creation activities in highly R&D intensive industries,and more than 50% of them are used to meet the final demand of foreign markets.The impact of FDI on China’s export value added is complex,but there are certain rules to follow.At present,the impact of FDI on China’s value-added export is mainly manifested in strengthening the processing trade characteristics of China’s export and directly obtain the compensation of capital for participating in production activities.The technology spillover of FDI to China’s highly R&D intensive industries has a ceiling.Innovation,as the source of growth,must fundamentally rely on the more active R&D activities of the host country.MNEs are essentially "profit seeking",and the influence of FDI on China’s national value-added export is a static book of the complex network influence of MNEs.The export share of medium and low R&D intensive manufacturing industry is still high in China’s export.In the process of China’s economic transformation,the impact of FDI on China’s labor remuneration income and the indirect impact on domestic enterprises should not be underestimated.Although,This paper tried to systematically analysis the effect of FDI on China’s export,from perspectives of both value-added export and national value-added export,from both theoretical and empirical analysis and combine multiple sources of data and different accounting methods to confirm each other.Some conclusions are drawn,however,multinationals statistical data quality still have great improve space,Moreover,the widespread phenomenon of transfer investment and roundtripping investment,as well as the complex ownership structure of MNEs and unclear nationality of corporate beneficiaries still hinder the in-depth understanding.It is still challenging to more accurately depict the complex relationship between FDI and export,which is worth looking forward to.