Research On The Impact Of Economic Policy Uncertainty On Global Value Chain Participation

With the increasing volatility,uncertainty and complexity of globalization on the global economy,factors affecting economic volatility have increased,not only by shocks to supply and demand in the traditional sense,but also by exogenous and unpredictable non-market risks that lead to increased economic policy uncertainty.Influenced by external events,such as the U.S.-China trade friction and the new crown epidemic,uncertainty in global economic policy has risen sharply and has become one of the major challenges of future globalization.The reduction of transportation and communication costs brought by the information technology revolution and the weakening of trade barriers have made the growth of trade in global value chains gradually become one of the main drivers of world economic growth.With the continuous evolution of division of labor and cooperation in global value chains,more and more countries choose to integrate into the international division of labor system and develop an open economy,which makes the process of economic globalization accelerate continuously.However,since the subprime crisis,the economic recession has affected the division of labor cooperation in the global value chain,which accounts for two-thirds of global trade,to varying degrees.External shocks such as Brexit and the new crown epidemic have caused countries to adjust their economic policies,leading to a subsequent increase in barriers to foreign direct investment(FDI)and outward foreign direct investment(OFDI),which in turn has had an obvious impact on global value chain cooperation.Under the unfavorable international economic and trade environment,what is the effect of the adjustment of economic policies and the resulting uncertainty on the country’s participation in the division of labor in global value chains?Is it moderated by the two-way FDI factor? Are there differential effects of different modes of value chain participation,different types of national structural forms,and different types of industries? The text will systematically explore these questions and provide a reference basis for countries to make decisions on high-level participation in GVC cooperation under uncertainty policy conditions.Based on the existing research results,this paper constructs a cross-country panel data model consisting of 23 countries using ADB-MRIO database data to empirically test the impact of economic policy uncertainty on GVC participation and the mechanism of the impact of two-way FDI interacting with economic policy uncertainty on GVC participation.Secondly,based on the value added perspective to decompose total exports and measure the length,participation and status index of GVCs,the changes of economic policy uncertainty and GVC participation of a country during the sample period are analyzed to provide a factual basis for subsequent empirical tests and policy recommendations.Again,this paper empirically examines the impact of economic policy uncertainty on GVC participation using a fixed-effects regression model in conjunction with the above impact mechanism analysis,and conducts robustness and heterogeneity tests.Furthermore,the article also analyses the influence of uncertain Chinese economy policy on the GVC participation in Chinese manufacturing industry,and the results show that:(1)economic policy uncertainty has a suppressive effect on a country’s GVC participation,and the results pass the robustness test.At the same time,the interaction between economic policy uncertainty and two-way FDI has a suppressive effect on GVC participation,and the effect is more significant under the interaction between economic policy uncertainty and FDI;(2)Heterogeneity analysis shows that,with respect to the difference of GVC participation patterns,the increase of economic policy uncertainty has a suppressive effect on the increase of GVC participation,and the effect of economic policy uncertainty on The effect of economic policy uncertainty on GVC forward participation is greater than the effect on GVC backward participation.In terms of differences in country structure,the inhibitory effect of economic policy uncertainty on GVC participation in unitary countries is more significant.(3)The economic policy security significantly inhibited the GVC and GVC condition in China’s manufacturing sector,and the interaction of economic policy uncertainty and two-way FDI inhibits the increase of GVC participation of Chinese manufacturing industry.On the basis of the results of the study,some specific suggestions are proposed in this article:(1)actively participate in the formulation of international trade-related agreements,strengthen cooperation and exchanges between countries,improve trade relations with other countries,broaden cooperation areas,maintain good economic and trade cooperation relations,provide appropriate policy support for key cooperation areas to disperse the risks caused by economic policy uncertainties;strengthen the institutional mechanism for external risk assessment and timely disclosure of relevant information and forward planning to reduce the impact of economic policy uncertainty on GVC participation;(2)continuously support innovative R&D and improve the efficiency of high-tech industries to enhance the GVC participation position and the ability to resist the impact of policy uncertainty,and accelerate the development of key core technologies as well as the enhancement of human capital.Moreover,enterprises should also deeply optimize their own innovation mechanism,fully understand the imported advanced production equipment and core components and apply them for reinvention,build a unique technology system based on market demand,improve the efficiency of high-tech industry,avoid being constrained by developed countries,and reduce enterprises’ investment in low-risk low value-added links under the high uncertainty of economic policies thus aggravating(3)the government should actively encourage enterprises to "bring in" and "go out" to give full play to the role of foreign direct investment and foreign direct investment,and promote the participation in the global value chain to enhance the degree and level of participation;(4)Focus on promoting outward FDI in China’s emerging industries with advantages,especially in new energy vehicles,high-speed railroads,artificial intelligence and 5G communication infrastructure and other emerging industries with good application bases.Thus,it will help improve the status of the sector in the distribution of labor and collaboration within the global value chain.