How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive

Robert Koopman, Zhi Wang and Shang-Jin Wei

No 14109, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: As China's export juggernaut employs many imported inputs, there are many policy questions for which it is crucial to know the extent of domestic and foreign value added in its exports. The best known approach - the concept of "vertical specialization" proposed by Hummels, Ishii and Yi (2001) - is not appropriate for countries that engage actively in tariff/tax-favored processing exports such as China, Mexico, and Vietnam. We develop a general formula for computing domestic and foreign contents when processing exports are pervasive. Because this new formula requires some input-output coefficients not typically available from a conventional input-output table, we propose a mathematical programming procedure to estimate these coefficients by combining information from detailed trade statistics with input-output tables. By our estimation, the share of foreign content in China's exports is at about 50%, almost twice the estimate given by the HIY formula. There are also interesting variations across sectors and firm ownership. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). Foreign-invested firms also tend to have higher foreign content in their exports than do domestic firms.

JEL-codes: F1 O1 O53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cna, nep-dev and nep-int
Date: Written 2008-06
Note: ITI
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