A Study On The Traditional Industrial Structure Upgrade Of Zhejiang Based On Factor Endowment

Over the years of reform and opening up, the economic development in Zhejiang has followed the strategy of comparative advantage, based on the local factor endowment, relied on the endogenous folk strength, to develop labor-intensive industries, made brilliant achievements. But in the global value chain, because of low side of industry, low level of technology and low-end of product, the traditional industry of Zhejiang can only rely on low-price competition to occupy the lower end of market value, resulting tendency of product homogeneity, intense competition, and technological low-end. Meanwhile, as the cost of land, labor and other factor are rising, the firms have weak capacity of adjustment and transform, and other provinces are catching up and other factors, resulting in weakening the dynamic comparative advantage of Zhejiang. So transformation and upgrading of traditional industries have been facing tremendous pressure. At the same time, the new round of world industrial transfer, the domestic consumption structure, and evolution of the province such as endowment structure, for the upgrading of industrial structure in Zhejiang Province has created opportunities. Zhejiang needs to adjust economic development to face the challenges and opportunities, improve the competitive position in the international division of labor and domestic competition, obtain greater development space and the division of interests on the basis of comparative advantage, according to the knowledge economy the characteristics of the era of global planning combination of factors of production and development strategies, and strengthen the evolution of factor endowment structure to high-end, and through the optimum allocation of factors, and then fulfill the industrial structure upgrading, transform the comparative advantage to competitive advantage gradually.Currently, the structural upgrading of traditional industries in Zhejiang Province is extremely difficult and slow. There are many reasons, such as traditional industries in the economy share is relatively high, the upgrade is difficult; upgrading of traditional industries lack of motivation, for lack of effective government intervention, private enterprises due to risk aversion preferences; and lack of capacity for the low level of enterprise independent innovation ability, and industrial organization and so on.But the industrial structure is essentially a resource allocation problem, the adjustment and upgrade of the industrial structure factor endowment of resources is actually the optimal allocation among industries. The most fundamental reason of high and low level of industrial structure is subject to the factor endowment structure of the economy. In the past, the most competitiveness in Zhejiang Province is the labor-intensive manufacturing, which is a particular insurmountable stage in the factor endowment structure of that time. With the development of international trade in Zhejiang Province, the international factor flows and increase the level of the local economy, factor endowment structure is change, toward the direction of conducive to upgrading. But in this context, the industrial structure adjustment and upgrade has lagged behind, we should explore their underlying causes.In view of this, from the perspective of factor endowments, this article use the theory of comparative advantage, competitive advantage and the industrial structure, combining the empirical analysis to research the underlying causes of why the structural upgrading of traditional industries in Zhejiang Province is extremely difficult and slow. And the put forward the upgrade paths, and the propose countermeasures.An outline of the paper is as follows. (1) Introduction:It presents the back ground and significance of the research, introduced the brief and innovation of the paper. (2)Literature Review:Review of the current situation of domestic and foreign scholars on the theory of industrial structure; and the review between the factor endowment structure and the industrial structure upgrade issues, mainly through the comparative analysis of the comparative advantage theory and the competitive advantage theory, emphasizing the link between them, and clarify the necessity of transform the comparative advantages to competitive advantage. (3) Mechanism:Divided the mechanism into the pushing mechanism and the pulling mechanism, discussing its impact on the role of industrial upgrading. (4) Empirical analysis from the perspective factor endowments:analyze the factor endowments, comparative advantage and industry structure respectively, and constructing the relevant model to describe the relationship between of the allocation of factors and upgrade of industrial structure factor endowment configurations, trying to analyze with changes in the structure of factor endowments, Zhejiang is achieved through the optimal allocation of endowment structure, reasonable choice of the direction of upgrading the industrial structure, and promote the upgrading of industrial structure to achieve the best rate or not. And through empirical analysis, from the perspective of factor endowments to find the reasons.(5)From the perspective of factor prices to further explore reasons for the slow upgrade of industrial structure:due to administrative intervention, factor market imperfections and other reasons, the factor prices of Zhejiang may be distorted to a certain degree, when the business role at the wrong price signals under the choice of technology and industry, will lead to distortions in resource allocation and economic efficiency losses, and impede the best range of industrial structure upgrade. To this chapter, we use labor and capital as variables to further investigate of the upgrading of industrial structure of Zhejiang. (6)The choices of industrial structure upgrade path:this chapter base on factor endowments, from the perspective of the global value chain, to discuss the upgrade path of traditional industries upgrade in Zhejiang, divided process upgrading, product upgrading, functional upgrading, and chain upgrading. (7) Strategy and conclusions:perfect factor market; achieve the planning of the global factors; realize the grads transfer of industries; develop the producer services. At the end is a brief conclusion of the paper and points out direction of following research.