Study On The Upgrading Strategy Of Processing Trade Of Shandong Based On The Global Value Chain

China began to develop processing trade at the beginning of reform and opening up. Processing trade of Shandong province takes this opportunity to get a rapid development. As one of the province whose processing trade developed earlier, Shandong province develops its processing trade from zero to a large scale today. After30years of rapid development, the processing trade of Shandong province has accounted for half of the international trade of Shandong province, and played a leading role in international trade of Shandong Province, and become an important approach for Shandong province to participate into the global value chains and the international division of labor.The advantage with which the processing trade of Shandong province can be embedded in the global value chain is its comparative advantage of low labor cost. At the same time, accompanied by a wave of industrial transfer of the developed countries and regions in the late1980s to the early1990s, as well as the "four tigers in Asia", Shandong province seizes the chance timely to develop its processing trade vigorously. From the perspective of the global value chain, Shandong province takes the lowest-end part of the processing and assembly segment with its comparative advantage of low labor cost and the processing trade of Shandong province mainly concentrates in labor-intensive industries and resource-consuming industries. The economic value added by the processing trade industry in Shandong province in this part is very low. The return in this part is the least in the whole global value chain. With the price of labor rising in recent years, the comparative advantage of labor cost of Shandong province is being gradually nibbled. After the financial crisis since2008, the development of the processing trade of Shandong province is quite recession and there is a negative growth in both2009and2012. Moreover, the proportion of the processing trade industry of Shandong province in the international trade of Shandong province also reduces to a lower level compared with the level before the financial crisis in2008.Nevertheless, the processing trade is still an important form for Shandong province to participate in the global value chain and the international division of labor. The contribution of the processing trade of Shandong province to the economic growth of Shandong province is obvious since the beginning of the reform and opening up. In the long run, the processing trade of Shandong province is also one of the continued growth pole of Shandong economic. In contrast, the development of the processing trade of Shandong province falls into a bottleneck. It cannot be comparable with itself from the1990s to the beginning of this century, not only in size and growth speed of the processing trade of Shandong province but also in contribution to the international trade and economic growth of Shandong province. The processing trade of Shandong province needs to enhance its position and coverage in the global value chain, and discover and create its own competitive comparative advantage except the advantage of low labor cost.In the process of the development of processing trade of Shandong province, an industry combination of labor-intensive industry and technology-intensive like mechanical and electrical products has developed rapidly, however, the proportion of the high-tech industries with a high economic value-added is still not very large. The processing trade of Shandong province needs a technology upgrading in the process level and an industry upgrading from the low value-added industries to high value-added industries so that it can be able to realize the upgrading from the processing and assembly segment, the lowest-end of the global value chain, to upstream segment (like key parts processing, product design, enact standards) and downstream segment (like physical distribution, marketing construction brand sales), in which there are both high value-added. Or it needs take measures to cover numerous segment of the global value chain in order to make access to the value-added in more segments.From the perspective of single corporate, the processing trade enterprises of Shandong province must enhance their abilities of independent innovation. It can bring high efficiency to the enterprises to develop the process innovation, management innovation and organizational forms innovation. At the same time, these enterprises must strengthen learning the production and management experience from domestic and foreign enterprises which stand in the position of leadership in the global value chain, and also the construction and training of the competitive human resource. From the perspective of the whole industry, the processing trade industry of Shandong province should change the situation that it rely on its comparative advantage of low labor cost too much and reform the system of scientific research to encourage the innovation of science and technology. Increase continuously the proportion of high-tech industry in the processing trade industry of Shandong province. Guide fund resource, technology resource and human resource to the high-tech industry with the preferential conditions of taxes and import and export sectors to encourage the high-tech industry to be the leader force of development of the processing trade of Shandong province. At the same time, take measure to increase the ratio of the domestic-funded enterprises in the processing trade industry of Shandong province to encourage the domestic-funded enterprises to become the leaders of the processing trade of Shandong province so as to drive the rapid development of other related industries. With that, the effect of industry agglomeration could be released in Shandong province. Co-ordinate the balanced development of the processing trade industry of the whole Shandong province between the eastern coastal areas and the central and western inland areas, and take full advantage of the geographical and resource advantage of each city in Shandong province. To realize the upgrading of the processing trade of Shandong province based on the global value chain, it needs for the government’s support in policy-making and construction of management and supervision as well as the construction of government service system. Create a favorable environment for the upgrading of the processing trade of Shandong Province based on the global value chain.