In this paper, the study on the status of processing trade in Shandong with the qualitative and quantitative methods shows that processing trade accounts for half of foreign trade in Shandong and it makes outstanding contribution on promoting economic growth, improving industrial structure, making technological progress and increasing employment and so on. However, lots of problems still exists in Processing Trade of Shandong, such as unreasonable industrial structure,short chain, lack of independent intellectual property rights and famous brands, low level of supporting industries, uneven regional development, great environment and resource issues and frequent occurrence of international trade friction. On the background of the new round of elements of restructuring and the global financial crisis, transformation and upgrading of processing trade is the only choice.In this paper, based on deep research on the theory of processing trade at home and abroad, the core meaning of upgrading of processing trade is to enhance the position in the corporate value chain and to increase the added-value rate of processing trade. The specific direction includes the products of processing trade upgrading, industrial upgrading, the main upgrading, development model upgrading, supporting industries upgrading and space layout optimization.In this paper, combined with the situation in Shandong and comprehensive basis of previous studies and with the principal component methods, the empirical study on the affecting factors shows that the industrial structure, product mix, foreign direct investment, foreign trade dependence, element ratios, the rate of technological progress, supporting services, economic development, labor costs, human capital endowments, and transportation costs have an important impact on the upgrading of processing trade in Shandong.In this paper, in view of the existing problems and affecting factors of processing trade of Shandong combined with the relevant economic theory, the countermeasure to achieve the transformation and upgrading of processing trade in Shandong is proposed, which are to promote and strengthen the government's policy support, to enhance enterprise's R&D and technological innovation, to promote industrial linkages, to develop industrial clusters, to improve the processing trade supporting services and service management, to optimize the geographical distribution of processing trade in Shandong and carrying out overseas processing trade. |