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The Domestic Segment of Global Supply Chains in China under State Capitalism

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  • Heiwai Tang
  • Fei Wang
  • Zhi Wang

Abstract

This paper proposes methods to incorporate firm heterogeneity in the standard IO-table based approach to portray the domestic segment of global value chains in a country. Using Chinese firm census data for both manufacturing and service sectors, along with constrained optimization techniques, we split the conventional IO table into sub-accounts, which are used to estimate direct and indirect domestic value added in exports of different types of firm. We find that in China, both state-owned enterprises (SOEs) and small and medium domestic private enterprises (SMEs) have much higher shares of indirect exports and ratios of value-added exports to gross exports (VAX), compared to foreign-invested and large domestic private firms. Based on IO tables for both 2007 and 2010, we find increasing VAX ratios for all firm types, particularly for SOEs. By extending the method proposed by Antràs et al. (2012), we find that SOEs are consistently more upstream while SMEs are consistently more downstream within industries. These findings suggest that SOEs still play an important role in shaping China’s exports.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4797.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4797

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Keywords: value-added trade; global supply chain; intra-national trade; state capitalism;

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References

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  1. David Hummels & Jun Ishii & Kei-Mu Yi, 1999. "The nature and growth of vertical specialization in world trade," Staff Reports 72, Federal Reserve Bank of New York.
  2. Shang-Jin Wei & Jaebin Ahn & Amit K. Khandelwal, 2010. "The Role of Intermediaries in Facilitating Trade," Working Papers id:2557, eSocialSciences.
  3. Chen, Xikang & Cheng, Leonard K. & Fung, K.C. & Lau, Lawrence J. & Sung, Yun-Wing & Zhu, K. & Yang, C. & Pei, J. & Duan, Y., 2012. "Domestic value added and employment generated by Chinese exports: A quantitative estimation," China Economic Review, Elsevier, vol. 23(4), pages 850-864.
  4. Antràs, Pol & Chor, Davin, 2012. "Organizing the Global Value Chain," CEPR Discussion Papers 9018, C.E.P.R. Discussion Papers.
  5. Zhi Wang & Shang-Jin Wei & Kunfu Zhu, 2013. "Quantifying International Production Sharing at the Bilateral and Sector Levels," NBER Working Papers 19677, National Bureau of Economic Research, Inc.
  6. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Wholesalers and Retailers in U.S. Trade (Long Version)," CEP Discussion Papers dp0968, Centre for Economic Performance, LSE.
  7. Loren Brandt & Johannes Van Biesebroeck & Yifan Zhang, 2009. "Creative Accounting or Creative Destruction? Firm-level Productivity Growth in Chinese Manufacturing," NBER Working Papers 15152, National Bureau of Economic Research, Inc.
  8. Antràs, Pol & Chor, Davin & Fally, Thibault & Hillberry, Russell, 2012. "Measuring the Upstreamness of Production and Trade Flows," CEPR Discussion Papers 8839, C.E.P.R. Discussion Papers.
  9. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
  10. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
  11. Antras, Pol & Costinot, Arnaud, 2011. "Intermediated Trade," Scholarly Articles 4784024, Harvard University Department of Economics.
  12. Koopman, Robert & Wang, Zhi & Wei, Shang-Jin, 2012. "Tracing Value-Added and Double Counting in Gross Exports," CEPR Discussion Papers 9245, C.E.P.R. Discussion Papers.
  13. Elizabeth Asiedu & James A. Freeman, 2007. "The Effect of Globalization on the Performance of Small- and Medium-Sized Enterprises in the United States: Does Owners' Race/Ethnicity Matter?," American Economic Review, American Economic Association, vol. 97(2), pages 368-372, May.
  14. Andrew B. Bernard & J. Bradford Jensen & Stephen Redding & Peter K. Schott, 2010. "Wholesalers and retailers in US Trade," LSE Research Online Documents on Economics 28614, London School of Economics and Political Science, LSE Library.
  15. Koopman, Robert & Wang, Zhi & Wei, Shang-Jin, 2012. "Estimating domestic content in exports when processing trade is pervasive," Journal of Development Economics, Elsevier, vol. 99(1), pages 178-189.
  16. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalisation," Working Papers id:640, eSocialSciences.
  17. Puzzello, Laura, 2012. "A proportionality assumption and measurement biases in the factor content of trade," Journal of International Economics, Elsevier, vol. 87(1), pages 105-111.
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