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Why has China’s vertical specialization declined?

Author

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  • Yuwan Duan
  • Erik Dietzenbacher
  • Xuemei Jiang
  • Xikang Chen
  • Cuihong Yang

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.

Suggested Citation

  • Yuwan Duan & Erik Dietzenbacher & Xuemei Jiang & Xikang Chen & Cuihong Yang, 2018. "Why has China’s vertical specialization declined?," Economic Systems Research, Taylor & Francis Journals, vol. 30(2), pages 178-200, April.
    • Handle: RePEc:taf:ecsysr:v:30:y:2018:i:2:p:178-200
    DOI: 10.1080/09535314.2018.1431610
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    Cited by:

    1. Liu, Bin & Wang, Dedong & Xu, Youquan & Liu, Chunlu & Luther, Mark, 2018. "Vertical specialisation measurement of energy embodied in international trade of the construction industry," Energy, Elsevier, vol. 165(PB), pages 689-700.
    2. Kirill Muradov, 2021. "Towards input–output‐based measurements of trade creation and trade diversion," The World Economy, Wiley Blackwell, vol. 44(6), pages 1814-1841, June.

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