Tracing value added in gross exports of China: Comparison with the USA,Japan, Korea,and India based on generalized LMDI

This study first traces value added in gross exports of China during 2000–2014 to four components, namely domestic value added absorbed abroad (DVA), domestic value added return home (RDV), foreign value added (FVA), and pure double-counted terms (PDC), then compares these four components in China's exports with those in exports of the USA, Japan, Korea, and India. Second, this paper proposes a generalized logarithmic mean Divisia index (GLMDI) method and combines additive and multiplicative decomposition to decompose DVA gaps between China and the other four countries into value added coefficient effect, input-output structure effect, domestic scale effect and foreign scale effect. The aggregate value added coefficient effect is then attributed to sectoral level. Results show that DVA always occupied the largest share in the gross exports of China, which ranged from 74.60–82.84% during 2000–2014. Before 2011, DVA share of China's exports was generally the second smallest among five countries; since 2011, DVA share of China's exports increased, and China had the largest DVA share in 2014 (81.39%). Sectors having a large FVA share in China's exports usually had a large DVA share, such as “Mining” (MIN), “Computers, Electronic and Optical” (CEO), and “Basic Metals” (BAS). Additive and multiplicative decomposition analyses indicate that value added coefficients had a negative and increased effect on DVA gaps between China and the other four countries. Attribution analysis revealed that CEO sector had the largest negative value added coefficient effect in comparison between China and the USA, Japan, and Korea and its effect increased in comparison between China and the other four countries. Policy implications derived are finally discussed.     

CO2 Emissions Embodied in China＇s Foreign Trade： An Investigation from the Perspective of Global Vertical Specialization

In light of the growth in vertically specialized in global trade, the present paper uses input output tables from the World Input-Output Database to construct an environmental multi regional input-output model to calculate the CO2 emissions embodied in China＇s international trade during 1995-2009. The advantage of this model lies in its incorporation of the re exported CO2 emissions component embodied in trade and its ability to differentiate domestic sourced CO2 emissions from foreign-sourced CO2 emissions in trade. The results show that carbon emissions embodied in both China＇s exports and imports increased significantly during 1995-2009. One important reason for this is that the re-exported carbon emissions embodied in China＇s imported intermediate inputs increased substantially during this period. Our research reveals that accelerating the transformation of trade pattern and upgrading processing trade should be emphasized in the formulation of policy to prompt CO 2 emissions abatement in China.     

Assessing carbon emissions embodied in international trade based on shared responsibility

We study the carbon emissions of the world's five highest carbon emitters under three different criteria. In particular, we explore the shared responsibility (SR) criterion, under which both producers and consumers share the responsibility for emissions. Employing the multi-region input-output model to calculate the SR based on the value-added method, we can investigate carbon emissions at both national and sectoral levels. Between 2002–2014, carbon emissions in China and India grew dramatically. SR increased by 157% in China and 116% in India. The main driving force of China's carbon emissions was the rapid growth of its exports, and the main driver of India's carbon emissions was its high carbon-intensive production technologies. Although carbon emissions had a declining trend in the USA and Japan, it could have resulted from cross-border carbon leakage. More than 40% of the five countries’ national carbon emissions under SR were attributed to “electricity, gas, steam and air conditioning supply”. This overwhelming share was attributable to their large amounts of production and high carbon emission intensity.     

Estimation of China＇s Embodied CO2 Emissions during 2000-2009

The problem of CO₂ embodied in international trade has attracted increasing attention in China. To analyze this issue, the present paper directly calculates emission factors for 15 industries in 2002, 2005 and 2007. We then examine a consumption‐based system and a single‐region input–output model to estimate China's embodied emissions during 2000–2009. Our results show that, when a consumption‐based system is adopted, China's emissions are lower than those reported by some international organizations. The rapid growth in China's exports is a key determinant of China's rising total emissions. All countries should strengthen their cooperation in improving their current greenhouse gas inventories. Furthermore, China needs to encourage trade in low‐carbon products and technology.     

Effects of China's Structural Change on the Exports of East Asian Economies

The Chinese economy is slowing down and is in the midst of a structural transformation from export‐led and investment‐led growth to domestic demand‐led and consumption‐led growth. While there are widespread concerns among China's trading partners about the effect of the slowdown in China's growth on their exports, China's structural changes are also likely to have a significant impact: for example, China will import fewer machines and more cosmetics. The central objective of the present paper is to empirically examine the effect of China's structural transformation on the exports of East Asian economies, which have close trade linkages with China. We find that economies that have failed to increase the share of consumption goods in their exports to China have suffered larger declines in their quantities of exports to China. In addition, economies that have suffered losses in their shares of China's parts and components imports have faced reductions in their shares in China's total imports.     

International trade,FDI (foreign direct investment) and embodied CO2 emissions: A case study of Chinas industrial sectors

This paper calculates CO₂ emissions embodied in China's international trade using an input–output analysis, for the period 2000–2010. Based on industrial panel data, the two-step GMM estimation is used to test the impacts of FDI, trade openness, exports, imports and per capita income on CO₂ emissions. The results suggest that: (1) China's growing trade surplus is one of the important reasons for the rapidly rising CO₂ emissions; (2) large FDI inflows further aggravate China's CO₂ emissions; and (3) the industrial sector's per capita income and CO₂ emission relationship show inverted-U environmental Kuznets curve. Therefore, in order to achieve environmentally sustainable development of the economy, China should make efforts to transform its trade growth mode, adjust foreign investment structure, strengthen energy efficiency and develop a low-carbon economy.     

Does the Domestic Value Added Induced by China＇s Exports Really Belong to China？

Since 2001, the exports of foreign‐invested enterprises (FIEs) have accounted for more than 50 percent of China's total exports. As foreign capital occupies a high proportion of the total capital of FIEs, most FIEs' capital gains are foreign factor income. Although these gains are calculated as a part of China's GDP, they do not belong to China's national income. To determine the real contribution of exports to China's welfare, the present paper analyses the impact of exports on China's national income using a non‐competitive input–output model capturing processing trade. The results show that every US$1000 of China's exports generates US$506.8 of national income. The real contribution of exports to China's welfare is much smaller than what we expected. This suggests that China should endeavor to improve the gains from international markets or find another engine to maintain its economic growth.     

Two sides of the same coin: The economic and environmental effects of China's international trade from a global value chain perspective

China's accession to the World Trade Organization (WTO) has led to rapid economic growth and international trade development. However, China is also challenged with a heavy environmental burden due to the massive carbon emissions transferred through trade. By splitting production activities into traditional trade and global value chain (GVC) activities, this paper uses an intercountry input-output (ICIO) framework to study the imbalances of the economic and environmental effects between China's imports and exports at different levels. We define the indices value added per embodied emission in imports and exports (VPM and VPX, respectively). Additionally, we find a large gap between China's VPM and VPX, primarily because developed economies gain much higher value added per embodied emission than China gained through exports in GVC activities. Then, we study how to narrow the gap between China's VPM and VPX. The application of multiplicative structural decomposition analysis (SDA) and the logarithmic mean Divisia index I (LMDI-I) approach reveals the total and bilateral-sectoral contributions of the driving factor effects to the changes in China's VPM and VPX. The results provide tailored implications for promoting the comprehensive economic and environmental benefits of China's imports and exports.     

How much did China's emergence as “the world's factory” contribute to its national income?

Over time, China upgraded its capabilities to such an extent that it requires less imported materials, components, and services to maintain its central role in the global production network. Consequently, the domestic value added content of its exports has increased over time. Still, value added includes profits, which are partly earned by foreign capital owners, many of whom have set up operations in export processing zones. Such profits can be repatriated, and do not directly enhance the living standards in China. This paper will focus on the extent to which China's exporting activities have contributed to its Gross National Income (GNI), which is a better indicator of economy-wide living standards than GDP. Our results, based on input-output analysis, show that the increase in the share of Chinese GNI of a yuan of Chinese exports from 2002 to 2007 was modest, despite a marked growth of Chinese GDP contained in such a yuan of exports. From 2007 to 2017, however, the continued increase of domestic value added per yuan of exports did actually translate into considerably higher contributions of exports to GNI. Decomposition analyses show that changes in the commodity composition of China's export bundle and changes in the shares of national income in value added were the main cause of the different patterns before and after the financial crisis.     

Measuring the Competitiveness of China's Processed Exports

China's surplus in processing trade remains large. Processed exports are final goods produced using parts and components that are imported duty free. Because much of the value‐added of these exports comes from East Asia, exchange rates throughout the region should affect their foreign currency prices. This paper presents data on value‐added exchange rates for processed exports over the 1993–2013 period and reports that they significantly affect exports. While the renminbi appreciated 36 percent between the beginning of 2005 and the end of 2013, exchange rates in supply chain countries depreciated. This has mitigated the effect of the RMB appreciation on the price competitiveness of processed exports.     

The Belt,the Road,and the carbon emissions in China

This paper explores the effect of the Belt and Road Initiative (BRI) on China's exports and the domestic carbon emissions induced by the exports. We employ a decomposition framework to assess the driving factors of the change of CO₂ emissions induced by China's exports to different destinations and evaluate the main contributions of the gap between the BRI countries and non-BRI (NBRI) countries. The decomposition results show that while the scale effect was the dominant force behind the pre-BRI emission growth, the contribution of the composition effect became more prominent after the inception of the Initiative. Our econometric analysis suggests that the Initiative leads to an increase in the share of carbon-intensive products in China's exports to the BRI countries by nearly 5 percentage points, which is approximately one quarter of the share of carbon-intensive exports to the BRI countries. A further investigation reveals that China's international project contracting is the main channel that has resulted in the increase of the share of carbon-intensive exports in China's exports to the BRI countries.     

Trade in factor income and the US-China trade balance

US multindoational enterprises sell considerable amounts of products to China's domestic consumers that are “made” in either China or other countries. However, these sales are not counted as US exports to China. To account for this, we propose a beyond-borders approach to measuring trade flows that explicitly considers firm ownership, termed “trade in factor income (TiFI),” that defines the US-owned factor income induced by China's final demand as US exports to China. Applying this approach to OECD data, we find that on average from 2005 to 2016 in TiFI terms, US exports to China were 20.34% and 8.21% greater, China's exports to the US were 1.64% and 16.04% less, and the US trade deficits with China were 17.4% and 32.0% less than the trade figures reported in value added and gross terms, respectively. The concept of TiFI transforms trade measures from a territory-based “made in” label to a factor income-based “created by” label.     

Trade Barriers and Participation in the Global Value Chain: An Empirical Study Based on Anti‐dumping toward China

This paper investigates the effects of trade barriers on China's participation in the global value chain (GVC) using a thorough decomposition approach for trade volume, total exports, final exports and intermediate exports. Our econometric results indicate that anti‐dumping (AD) measures initiated by trade partners have restrained the process of China's participation in the GVC. From 2000 to 2014, AD measures reduced the foreign value‐added rate of total, final and intermediate exports by 4.5 to 28.7 percent, 3.4 to 17 percent and 1.2 to 8.5 percent, respectively. In addition, suffering the effects of AD measures, China's GVC position index declined by 8.2 percent to 28.6 percent during this period. Moreover, AD measures have increased industries' upstream index by 3.2 to 13.7 percent over the same period. These results imply that both the petition and approval of AD cases has had a negative influence on the extent and position of China's GVC participation.     

Remedy or Poison: Impacts of China's Outward Direct Investment on Its Exports

During the past decade, China's outward direct investment (ODI) and exports have experienced rapid growth, drawing increasing attention to the relationship between them. Using the gravity model based on panel data on China's ODI and trade to 174 countries and regions during 2003–2012, the present paper investigates the impacts of China's ODI on exports. We find that China's ODI to a host country significantly promotes China's trade with that economy: a 10‐percent increase in ODI stock can lead to a 2.14‐percent increase in exports, a 2.07‐percent increase in imports and a 2.87‐percent increase in net exports. The scale of the host country's economy, its infrastructure and its distance to China also have significant impacts on China's exports. Therefore, growth in ODI will facilitate China's trade and integration into the global economy, and enhance industrial upgrading in China by transferring the low‐end industries abroad.     

Analysis on CO2 Emissions Transferred from Developed Economies to China through Trade

Based on a global input–output model, this paper investigates the CO₂ emission transfer between China and developed economies through trade. The results show that approximately 15–23 percent of China's production‐based emissions during 1995–2009 were induced by the production of goods and services satisfying final demand in developed economies. Decomposition of emission transfers shows that trade of intermediate products played a significant role in emission transfer from developed economies to China. Most developed economies have consumption‐based emission responsibilities that are higher than their production‐based responsibilities, whereas China's consumption‐based responsibility is significantly lower than its production‐based responsibility. We argue that a fair and efficient carbon accounting approach should take CO emission transfers from developed economies to developing economies into consideration. It is important that China and its developed trade partners cooperate in reducing emission transfers.     

The sophistication of exports: Is China special?

Recent studies have found that China is “special” in exporting highly sophisticated goods not comparable with its income level. In this paper we identify two measurement biases that account for this “China is special” observation. First, product quality has not been fully considered in the measurement of sophistication, which has caused an overestimation of the sophistication of China's exports. Second, the average income of China has been used to measure the export capability of China, which has caused an underestimation of China's capability of exporting sophisticated goods. After correcting the two measurement biases, China appears much less as an outlier in the cross-country comparison of the sophistication of exports.     

Are China's Exports Crowding Out or Being Crowded Out? Evidence from Japan's Imports

Previous studies have investigated whether Chinese exports have crowded out those from other countries. However, what has yet to be considered is the evidence based on different quality varieties. Using the most detailed Harmonized System 9‐digit product‐level data, the present paper provides evidence of crowding‐out and crowded‐out effects across different product quality segments and across manufacturing sectors by quality segments. The empirical evidence presented in this paper shows that the crowding‐out effects of Chinese exports have been greatest at the lower end of the quality spectrum but less significant at the higher quality spectrum. Moreover, since 2007, China's own exports of lower quality manufactured goods have been increasingly crowded out. The key policy implication is that China's export path is in line with that taken by other Asian economies in previous decades; the crowded‐out effect could achieve win–win outcomes for countries involved; and lower income countries would do well to be open to receive those relocated low value‐added industries from China. However, the relocation policy in China is best implemented gradually as climbing up the product quality ladder takes time.     

What are China's real gains within global value chains? Measuring domestic value added in China's exports of manufactures

This paper aims to investigate China's gains of participating in global value chains (GVCs) in terms of GDP in exports (DVA - domestic value added) and the factors affecting China's gains. The paper decomposes the gross exports of China so as to get the components that make up total GDP in the exports of the country, namely the value-added exports and DVA that are returned from abroad. Then the two components are measured to obtain the scale of GDP in China's exports both on country and sector level. The results show that, firstly, both value-added exports and the GDP in China's exports are less than the traditional gross trade statistics, indicating that there is a gap of real trade gains under GVCs. Secondly, comparing whether the proportion of DVA in total exports, the proportion of DVA in exports of manufactures or the proportion of RDV in total DVA, the gaps between China and the developed countries such as the United States, Germany and Japan do exist. Especially, considering the RDV of China, the proportion is significantly lower than that of major developed countries such as the United States and Germany, indicating that China lags far behind developed countries in the capabilities of supplying high value-added intermediate goods. Lastly, the empirical results suggest that DVA in China's exports has progressively increased in response to the productivity enhancement; research and development (R&D) inputs and capital formation, and the synergies between R&D and vertical specialization affect China's DVA growth in exports positively.     

Is the Chinese Economy Moving in the Direction of Tertiarization？

Drawing upon output, employment, consumption and trade data, this article examtnes whether there is an economic tertiarization trend in China ＇s economy and evaluates the common factors driving current trends. It shows that the tertiarization trend is evident for the overall economy and most regions in terms of the service nominal value-added ratio and service employment and consumption. However, the tertiarization trend is not significant in terms of the service real value-added ratio, and there is even some concurrent ＂detertiarization ＂ because of the decreasing proportion of services in imports and exports. lndeed, China ＇s tertiarization trend is far behind its industrialization trend The rise in the relative prices of services explains the rising proportion of household service consumption expenditure and further illuminates why the service real value-added ratio has not grown. The main cause for the growing percentage of service employment is the lag in service labor productivity growth in interaction with the price inelasticity of service demand ＂Cost disease ＂ has appeared in service consumption.     

Empirical Analysis of the Structure of Sino-US Agricultural Trade

This paper empirically analyzes the structure of agricultural trade between China and the USA from 1996 to 2005, using different trade indexes such as the Grubel—Lloyd Index, the Revealed Comparative Advantage Index, the Finger—Kreinin Similitude Index and the Export Diversification Index, with a focus on the issues impeding Sino‐US agricultural trade. We found that over the period of 1996 to 2005, inter‐industry trade outweighed intra‐industry trade in Sino‐US agricultural trade, and that bilateral trade was more complementary than competitive. At the same time, China's agricultural exports were more diversified than USA exports, but China's degree of diversification steadily declined during the sample period. The findings indicate that there exists great potential for further development of agricultural trade between China and the USA, and that positive and effective trade policies will result in maximization of potential agricultural trade development and will bring forth mutual benefits to both countries.