How did China's GVCs participation influence its manufacturing productivity?

Ping Hua ()
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Ping Hua: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: By using panel data of 15 Chinese manufacturing industries over the 2005-2014 period from OECD TiVA and WIOD databases, the impact of China's GVCs participation on labor productivity is estimated. We find that while the productivity elasticity of the share of sector's foreign value added relative to sector's exports known as sector backward linkages is negative, that relative to China's gross exports named structure backward linkage is positive. As the annual average growth rates of both backward linkages are negative, China's backward linkages have contributed to productivity growth of 6.41% per year on average. We find that the positive productivity elasticity of the share of domestic intermediate goods embodied in exports of third countries relative to sector's exports, named sector forward linages together with a positive annual average growth rate, and that relative to China's exports named structure forward linkages together with a negative annual average growth rate, have increased productivity of 1.97% per year on average. We find finally that GVCs position is improved from 0.3 in 2005 to 0.7 in 2014. China's GVCs participation exerted positive productivity effects via optimizing resource allocation inside sectors towards more efficiency ones, via moving up from low productivity backward linkages to higher productivity forward linkages and via improving its position. This diminished the risk to be entrenched in low-profitability low productivity growth GVCs activities in China. However, the productivity contribution of backward linkages 3 times higher than that of forward linkage suggests that the future positive productivity impact of GVCs moving up may be much more difficult in a less favorable context (trade war between China and USA, reindustrialization and trade protection related to Covid-19 for example).

Keywords: JEL Classification Numbers: F62; F63; O5; O47 global value chains; manufacturing productivity; China (search for similar items in EconPapers)
Date: 2021-12-31
New Economics Papers: this item is included in nep-cna, nep-eff, nep-his, nep-int and nep-tid
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