On The Impact Of Financial Development On Domestic Value-Added In High-End Manufacturing Exports

Forty years of reform and opening up has seen the rapid development of China's economy which is accompanied by changes in the structure of exports and the improvement of financial development.However,the trend of counter globalization and the reduction of labor cost advantages have made China face a severe test.The purpose of this paper is to explore the changes in global financial development and high-end manufacturing,to study the impact of financial development on domestic value added in exports of high-end manufacturing from an international perspective,and to provide policy suggestions for the upgrading of China's industrial structure.Based on the concept of financial development and comparative advantage theory,this paper expands the model of financial development by using the model of Redding(1999)and Kletzer & Bardhan(1987),and theoretically demonstrated the mechanism of financial development's impact on high-end manufacturing;with the WDI database and the panel data of 65 countries and regions in the OECD TiVA database from 2004 to 2016,the following conclusions were obtained:(1)The global financial development has been steadily increasing,but there is still a large gap between developing countries and developed countries.In 2009,the average private sector credit/GDP provided by the bank for the 36 OECD countries was 104.2%,while the non-OECD countries were only 53.3%.(2)The domestic value added in exports of high-end manufacturing is highly concentrated around the world.The concentration of the top ten countries and regions has reached nearly 80%,and the IDVAR of China's domestic value added in exports of high-end manufacturing has continued to rise and stand out.(3)The improvement of the level of financial development can significantly promote the domestic value added in exports of high-end manufacturing,and the promotion effect to developing countries is larger.For every 1 percentage point increase in the ratio of credit to GDP supplied by commercial banks to the private sector,it can boost the IDVAR of high-end manufacturing in developing countries by 0.04 percentage points.(4)Increasing R&D expenditures,enriching factor endowments,and optimizing the business environment can also significantly increase the domestic value added in exports of high-end manufacturing,and are more important for developing countries.The increase in R&D investment has contributed to the promotion of IDVAR in high-end manufacturing in non-OECD countries by 6.329 percentage points,which is more than five times that of the OECD countries(1.241 percentage points).(5)Foreign direct investment and out-forward foreign direct investment have no significant effect on high-end manufacturing IDVAR in developed countries,but foreign direct investment still plays a important role in promoting IDVAR in high-end manufacturing in developing countries.Based on the above conclusions,this paper proposes policy suggestions such as implementing the principle of neutral competition and the neutral principle of ownership,curbing economic financialization and industrial hollowing,and promoting the decentralization of power and negative lists.