China Industrial Structure In Vertical Specialization Perspective

Since the reform and opening up, China has achieved remarkable economy growth. Especially after the accession to the WTO, China participated in the international division of labor and trade with the comparative advantage of labor, and the labor-intensive industries have made great strides. However, since the 1990s, significant changes have taken place in the structure of China’s foreign trade. The leading export goods gradually transform from low value-added products, such as clothing, shoes and hats, to high-tech products, such as the mechanical and electrical products. Some scholars believe that the improvement of the share of capital and technology intensive products in China’s export trade products reflects that China’s comparative advantage of labor has been weakened. In addition, it may also confirm the results of the industrial structure adjustment of China’s industry. However, considering vertical specialization mode, in which a country imports intermediate goods for processing and export the final product, takes increasingly important part in international division of labor market, can the international competitiveness of China’s exports transfers to capital and technology intensive products really means that our country has gradually realized the upgrading of industrial structure? Answer to this question is of great significance to our country industrial policy.With the acceleration development of global economic integration, the division of labor between countries develops from inter-industry trade to intra-industry trade, then intra-industry division of labor further deepen into the product, evolved Vertical specialization. Based on the theory of industrial structure and the vertical specialization, and the 1987-2007 input-output table of China, China’s participation in vertical specialization was calculated. Through the result can be found that China’s overall participation in the vertical specialization was gradually rising year by year. And specific to the industry, capital and technology intensive industry participation in the vertical specialization was significantly stronger than labor-intensive industries, and also rise significantly faster than labor-intensive industries. Tthus we can judge that the improvement of the share of capital and technology-intensive products in exports mainly comes from imported products’value occupies the proportion of the exports of manufactured goods improved significantly.In addition, the paper used the added value and the output proportion of the industry as measures of industrial structure. Found by empirical testing, the added value of capital and technology-intensive industries, whose participation in the vertical specialization was significantly promoted, does not increase, or even decline. This result shows that China has failed to complete the upgrade of industrial structure. As a product of the production process in countries with low added value, China is still locked in the low end of the value chain. Through the analysis above, this paper proposes policy recommendations about how to take advantage of the development of vertical specialization to promote industrial restructuring and upgrading.