Analysis Of Foreign Added Value In China’s Exports

Currently, most countries around the world are connectedtogether by the global division of production activitiesand compose a complex production network. As an important node in this network, China hasextensive and important links with other countries.As the reduction in communication costs and transport costs,China’s participation in the activitiesof the vertical specialization isalso changing in the terms ofcoverage area and product structure.Thus, the traditional statistical method of measurementin import and export has been obsolete. Therefore, in this paper, the WIOD database is applied to calculate the added value of China’s trade, and the exported intermediates which are contained inChinese exports into various regions of the worldare decomposed. By analyzing the source regions of these importedintermediates, we find that there is a phenomenon called "location shift" in the choice of supply chain for China’s manufacturing industries, which indicates that the source regions of imported intermediatescontained in China’s exportshas been shifted from East regions to the wide regions, like East Asia, European Union and North America etc.. According to the analysis results, we find that there is a positive correlation betweenthe degree of the R & D activities occurred in an industry and the degree of vertical specialization. In other words, the higher technological sophistication the industry has, the moreimported intermediatesare contained. Controversially, the levelof vertical specialization in other EU regions decreaseswhilethe R & D activities rise.The paper is organized as follows. Chapter one presents the research background, the paper ideas,the innovations and the deficiencies. Chapter two as the literature review summarizes the researching progress of domestic and foreign scholars, and analyzes the advantages and disadvantages of each method. Chapter three as the theoretical foundation, introduces the definition, the division of labor and the types of motivations of vertical specialization, and analyzesthe impact imposed by R&Dactivities on the degree of vertical specialization. Chapter four introduces the measurement methods and the data sources.The deduced progress of FVS is listed and the merit and demeritin the database that used in this papercomparing with other databases. Chapter five analyzes the sources of the imported intermediatescontained in Chinese exports,introduces each sourceregions in 2011, and presents the trend of bothlow-technology andhigh-tech industries in the source regions from 1995 to 2011. Chapter six introduces the results found in this paper and the policy recommendations.The main innovations of this paper are as follows. Firstly, we have more knowledge about China’s role in the global network by decomposing the source regions of imported intermediatesin Chinese exports. Secondly, East Asia, as China’s largest source of intermediates, its importance is gradually reducedby. Thirdly, according to the decomposition results of EU, North America and East Asia, we find that there is a positive correlation betweenthe intensity of R&D activities and the degree of vertical specialization. In other words, the higher technological sophistication the industry has, the more imported intermediates are contained in the exports. Surprisingly, with the R & D activities rising, the level of industrial vertical specialization in other EU regions decreases.The reasons for theseoccurred results are the facts that both different international division of labor in different regions and varietydegree of participation in it.