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China’s functional upgrading in global value chains and its drivers: a multi-country chaining structural decomposition analysis

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  • Yuan Zhong
  • Zhenguo Wang
  • Yabin Zhang

Abstract

The functional activities, such as management, marketing, R&D and fabrication, carried out by a country or industry is of great importance for its governance and upgrading on the global value chains (GVCs). This paper provides a long-term macro-economic analysis on China’s functional upgrading in GVCs and its drivers between 1999 and 2011. We combine the world input-output database with the newly compiled labour occupations database to measure China’s functional income growth in internationally fragmented production networks, and then incorporate the concept into the chaining structural decomposition analysis (SDA) to explore its drivers. We find that China has achieved functional upgrading to some degree, reflected in the growth of China’s domestic value added in headquarter activities, such as R&D, at the aggregate and industrial levels. However, fabrication activity still stands out, indicating that China still has a long way to go on upgrading in GVCs. Finally, through the chaining SDA, we find that among the GVC production, technology and consumption effects, the consumption level (consumer demand) is the main factor driving the growth of China’s functional upgrading.

Suggested Citation

  • Yuan Zhong & Zhenguo Wang & Yabin Zhang, 2021. "China’s functional upgrading in global value chains and its drivers: a multi-country chaining structural decomposition analysis," Applied Economics, Taylor & Francis Journals, vol. 53(24), pages 2727-2742, May.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:24:p:2727-2742
    DOI: 10.1080/00036846.2020.1866161
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    Cited by:

    1. Hui Wang & Xin Zhong, 2023. "An Empirical Study on the Impact of Chinese OFDI on the Global Value Chain Positions of Countries Along the Belt and Road and Threshold Effects," SAGE Open, , vol. 13(1), pages 21582440231, February.
    2. Jingjing Huang & Yuan Zhong & Yabin Zhang, 2023. "Does Environmental Regulation of Cleaner Production Affect the Position of Enterprises in Global Value Chains? A Quasi-Natural Experiment Based on the Implementation of Cleaner Production," Sustainability, MDPI, vol. 15(13), pages 1-29, July.
    3. Xin Xu & Meiya Sun, 2025. "Digital Transformation, Internationalisation and ESG Performance of Multinational Companies," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(5), pages 2709-2725, July.
    4. Shuo Lu & Jiaming Li & Wenzhong Zhang & Fan Xiao, 2025. "How can the “resource curse” be broken? Transition factor flows, the urban life cycle and value chain upgrades in resource-based cities," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-15, December.

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