International Production Sharing and Export Development: An Examination for China and Vietnam

The phenomenon of international production sharing networks (also known as production fragmentation, global value chains, or vertical production networks), which is associated with offshoring/outsourcing, has gained increasingly importance in the contemporary globalization process. This paper analyzes the patterns and trends in international production sharing and export growth in China and Vietnam over the last twenty years. More specifically, in addition to overall trends, our study examines the developments across four broad economic sectors and fifteen manufacturing industries. Furthermore, for both countries the relationship between a country's participation in international production sharing networks and a country's export development (in terms of the domestic value-added content of exports) is investigated through a statistical analysis. The empirical results indicate that China and Vietnam have increased substantially their participation in production networks. Moreover, we find that the extent of a country's involvement in international production sharing highly correlates with improved export performance. This suggests that China's and Vietnam's impressive export expansion over the last twenty years can be attributed, in part, to increasing integration into global value chains.