The Impact Of Intermediate Goods To China Manufaturing Productivity

Since 1970 s, economic globalization speeding up, international specification deepening, trade of intermediate goods has developing fast due to the push of technological advance, becoming the main content of recent international trading. Intermediate goods trading separates the manufacturing processes of final goods, dispersing them among different countries with advanced countries focusing on the production of capital and technological intensive goods while developing countries focusing on the labor intensive goods. Each country in this relationship utilizes their relative advantage, improving the productivity of the entire society and significantly saving the resources. Intermediate goods trading materially affects the structure of domestic employment, revenue distribution, industry and technology level, which makes intermediate goods trading worth studying in current field of international trade theory.Since the reform and opening up, China has been participating increasingly deeper in international specialization with processing trade developing fast and scale of intermediate goods export and import expanding fast as well. In the meantime, China’s manufacturing industries advance swiftly and vigorously with gross output surged and labor productivity significantly improved. Manufacturing industries has become the backbone of China’s economic. Because intermediate good is manufacturing industry’s main input, structure and volume of intermediate good trading are closely related to the production of manufacturing industry. This paper classifies 28 manufacturing industries into 6 departments, then uses data of China’s intermediate good trading and manufacturing from 1999-2013 to analyze each department’s intermediate good trade volume, structure and situation of labor productivity. Next it analyzes the direct mechanism of how intermediate goods trade influences labor productivity through input-output effect, vertical specialization effect and competition effect. It also analyzes the indirect mechanism of scale of economic effect and industries upgrade. Last, this paper uses First Difference GMM Estimation and data from 2003-2011 to estimate dynamic panel model of manufacturing industries. It concludes that the previous and current intermediate goods import both significantly boost labor productivity of the entire manufacturing industries. Next, this paper ran the same estimation to each department and concludes that intermediate goods trading affects labor productivity of every department in different ways and with different extent.