Why has China’s vertical specialization declined? |
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| Authors: | Yuwan Duan Erik Dietzenbacher Xuemei Jiang Xikang Chen Cuihong Yang |
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| Institution: | 1. School of International Trade and Economics, Central University of Finance and Economics, Beijing, People’s Republic of China;2. Faculty of Economics and Business, University of Groningen, Groningen, Netherlands;3. School of Economics, Capital University of Economics and Business, Beijing, People’s Republic of China;4. Academy of Mathematics and Systems Science, China Academy of Sciences, Beijing, People’s Republic of China;5. School of Economics and Management, University of Chinese Academy of Sciences, Beijing, People’s Republic of China |
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| Abstract: | Vertical specialization (VS) is quantified by the VS share, which measures the average import content per dollar of exports. A characteristic of China’s export trade is its strong dependence on assembly and processing activities. To take proper account of this, China’s VS shares should explicitly distinguish processing export production from other production. We estimate China’s annual VS shares from 2000 to 2012—the latest year for which a special input–output table is available that makes such an explicit distinction. We find that VS shares increased from 2000 to 2004 and subsequently started to decrease. To explore why it has declined, we introduce a new structural decomposition approach. We find that the decrease of the VS share appears to have been driven mainly by the substitution of imported intermediates by domestic products. This occurred in particular in the production of exports, which implies an upgrading of China’s position in global value chains. |
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| Keywords: | Vertical specialization processing exports structural decomposition analysis China |
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