IDEAS home Printed from https://ideas.repec.org/p/bof/bofitp/2008_031.html
   My bibliography  Save this paper

How vertically specialized is Chinese trade?

Author

Listed:
  • Dean, Judith
  • Fung, K.C.
  • Wang, Zhi

Abstract

Two recent phenomena have transformed the nature of world trade: the explosive growth of Chinese trade, and the growth of vertically specialized trade due to international production fragmentation. While vertical specialization may explain much of the growth and unique features of Chinese trade, few papers have quantitatively assessed these two phenomena together. In part, this is because it is difficult to measure just how vertically specialized Chinese trade is. The unique features of China's extensive processing trade cause both the identification of imported intermediate goods, and their allocation across sectors, to depend upon the Chinese trade regime. In this paper, we estimate the vertical specialization of Chinese exports, addressing these two challenges. Using two Chinese benchmark input-output tables, and a detailed Chinese trade dataset which distinguishes processing trade from other forms of trade, we develop a new method of identifying intermediate goods imported into China. Vertical specialization is then estimated using two methods. The first method uses the Hummels, Ishii and Yi (2001) measure, the official benchmark IO tables, and incorporates our identification correction. The second method follows the first, but also incorporates the Koopman, Wang and Wei (2008) method of splitting the benchmark IO tables into separate tables for processing and normal exports, in order to address the allocation problem. Results show strong evidence of an Asian network of intermediate suppliers to China, and the two methods provide a range of estimates for the foreign content of Chinese exports. In 2002 aggregate exports ranges between 25% and 46%, with some individual sectors are as high as 52! %-95%. Across destinations, under both methods, the vertical specialization of Chinese exports declines with the level of development of the trading partner. JEL Codes: F10, F14 Keywords: China, fragmentation, vertical specialization, trade growth

Suggested Citation

  • Dean, Judith & Fung, K.C. & Wang, Zhi, 2008. "How vertically specialized is Chinese trade?," BOFIT Discussion Papers 31/2008, Bank of Finland, Institute for Economies in Transition.
  • Handle: RePEc:bof:bofitp:2008_031
    as

    Download full text from publisher

    File URL: https://helda.helsinki.fi/bof/bitstream/123456789/8079/1/160644.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Athukorala, Prema-chandra & Yamashita, Nobuaki, 2006. "Production fragmentation and trade integration: East Asia in a global context," The North American Journal of Economics and Finance, Elsevier, vol. 17(3), pages 233-256, December.
    2. James Markusen, 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," NBER Working Papers 11827, National Bureau of Economic Research, Inc.
    3. Amiti, Mary & Smarzynska Javorcik, Beata, 2008. "Trade costs and location of foreign firms in China," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 129-149, February.
    4. Robert C. Feenstra & Gordon H. Hanson, 2005. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 729-761.
    5. Jones, Ronald & Kierzkowski, Henryk & Lurong, Chen, 2005. "What does evidence tell us about fragmentation and outsourcing?," International Review of Economics & Finance, Elsevier, vol. 14(3), pages 305-316.
    6. Richard E. Baldwin, 2008. "Managing The Noodle Bowl: The Fragility Of East Asian Regionalism," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 53(03), pages 449-478.
    7. International Monetary Fund, 2005. "Trade Costs and Location of Foreign Firms in China," IMF Working Papers 2005/055, International Monetary Fund.
    8. Xikang Chen & Ju-e Guo & Cuihong Yang, 2005. "Extending the input-output model with assets," Economic Systems Research, Taylor & Francis Journals, vol. 17(2), pages 211-225.
    9. Prema-chandra Athukorala, 2006. "Multinational Production Networks and the New Geo-economic Division of Labour in the Pacific Rim," Departmental Working Papers 2006-09, The Australian National University, Arndt-Corden Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Aksoy, M. Ataman & Ng, Francis, 2013. "Demand growth versus market share gains : decomposing world manufacturing import growth," Policy Research Working Paper Series 6375, The World Bank.
    2. Song, Malin & Zhang, Jie & Wang, Shuhong, 2015. "Review of the network environmental efficiencies of listed petroleum enterprises in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 43(C), pages 65-71.
    3. Jesse Mora & Nirvikar Singh, 2013. "Trade productivity upgrading, trade fragmentation, and FDI in manufacturing: The Asian development experience," Indian Growth and Development Review, Emerald Group Publishing, vol. 6(1), pages 61-87, April.
    4. 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.
    5. Fidrmuc, Jarko & Korhonen, Iikka, 2010. "The impact of the global financial crisis on business cycles in Asian emerging economies," Journal of Asian Economics, Elsevier, vol. 21(3), pages 293-303, June.
    6. Guillaume Gaulier & Françoise Lemoine & Deniz Ünal, 2011. "China's Foreign Trade in the Perspective of a More Balanced Economic Growth," Working Papers 2011-03, CEPII research center.
    7. Peter Havlik & Olga Pindyuk & Roman Stöllinger, 2009. "Trade in Goods and Services between the EU and the BRICs," wiiw Research Reports 357, The Vienna Institute for International Economic Studies, wiiw.
    8. Wang, Zhi & Wei, Shang-Jin & Wong, Anna, 2010. "Does a Leapfrogging Growth Strategy Raise Growth Rate? Some International Evidence," Working Papers on Regional Economic Integration 47, Asian Development Bank.
    9. Dmitriy Izotov, 2013. "Zones with China's concessional regime: spatial concentration and foreign trade contribution," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(1), pages 123-132.
    10. K. C. Fung & Nathalie Aminian & Chris Y. Tung, 2016. "Some characteristics of innovation activities: Silicon Valley, California, China and Taiwan," Economic Change and Restructuring, Springer, vol. 49(2), pages 221-240, August.
    11. Françoise Lemoine & Deniz Ünal, 2012. "Scanning the Ups and Downs of China’s Trade Imbalances," Working Papers 2012-14, CEPII research center.
    12. Dietzenbacher, Erik & Pei, Jiansuo & Yang, Cuihong, 2012. "Trade, production fragmentation, and China's carbon dioxide emissions," Journal of Environmental Economics and Management, Elsevier, vol. 64(1), pages 88-101.
    13. Judith M. Dean & Mary E. Lovely, 2010. "Trade Growth, Production Fragmentation, and China's Environment," NBER Chapters, in: China's Growing Role in World Trade, pages 429-469, National Bureau of Economic Research, Inc.
    14. Roberts, Ivan & Rush, Anthony, 2012. "Understanding China's demand for resource imports," China Economic Review, Elsevier, vol. 23(3), pages 566-579.
    15. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    16. Ivan Roberts & Anthony Rush, 2010. "Sources of Chinese Demand for Resource Commodities," RBA Research Discussion Papers rdp2010-08, Reserve Bank of Australia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bruce A. Blonigen & Alyson C. Ma, 2019. "Please Pass the Catch-Up: The Relative Performance of Chinese and Foreign Firms in Chinese Exports," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 12, pages 401-445, World Scientific Publishing Co. Pte. Ltd..
    2. Françoise Nicolas, 2010. "De Factoandde Jureregional Economic Integration In East Asia: How Do They Interact," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(01), pages 7-25.
    3. Amador, João & Cabral, Sónia, 2014. "Global value chains: surveying drivers and measures," Working Paper Series 1739, European Central Bank.
    4. Witada Anukoonwattaka, 2007. "Outsourcing and International Production of a Multinational: A Theoretical Model and Empirical Evidence from Toyota, Thailand," DEGIT Conference Papers c012_045, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Leticia Blazquez & Carmen Diaz-Mora & Rosario Gandoy, 2011. "EU Integration and Production Networks: Evidende from Spain," ERSA conference papers ersa10p583, European Regional Science Association.
    6. Lall, Somik V. & Mengistae, Taye, 2005. "Business environment, clustering, and industry location : evidence from Indian cities," Policy Research Working Paper Series 3675, The World Bank.
    7. Mary-Françoise RENARD & Nasser ARY TANIMOUNE, 2005. "FDI convergence and Spatial Dependence between Chinese Provinces," Working Papers 200531, CERDI.
    8. Du, Julan & Lu, Yi & Tao, Zhigang, 2012. "Institutions and FDI location choice: The role of cultural distances," Journal of Asian Economics, Elsevier, vol. 23(3), pages 210-223.
    9. Götz Zeddies, 2011. "Determinants of international fragmentation of production in European Union," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 38(4), pages 511-537, November.
    10. Richard Baldwin & Javier Lopez-Gonzalez, 2015. "Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses," The World Economy, Wiley Blackwell, vol. 38(11), pages 1682-1721, November.
    11. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    12. Richard Baldwin & Toshihiro Okubo, 2014. "Networked FDI: Sales and Sourcing Patterns of Japanese Foreign Affiliates," The World Economy, Wiley Blackwell, vol. 37(8), pages 1051-1080, August.
    13. Taxiarchis Delis & Dimitrios Kyrkilis, 2017. "Locational Concentration of Foreign Direct Investment in China: a Cluster Factor-Based Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(4), pages 1115-1132, December.
    14. Deborah L. Swenson, 2008. "Multinationals and the creation of Chinese trade linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 596-618, May.
    15. Marco Giansoldati, 2010. "International Fragmentation and Agglomeration: From Theory to Empirics," Working Papers 2010_06, Department of Economics, University of Venice "Ca' Foscari".
    16. Joseph Pelzman, 2013. "“Womb for Rent”: International Service Trade Employing Assisted Reproduction Technologies (ARTs)," Review of International Economics, Wiley Blackwell, vol. 21(3), pages 387-400, August.
    17. Thierry Mayer, 2006. "Policy Coherence for Development : A Background paper on Foreign Direct Investment," Sciences Po publications 253, Sciences Po.
    18. Fukunari Kimura & Ayako Obashi, 2016. "Production Networks in East Asia: What We Know So Far," ADB Institute Series on Development Economics, in: Ganeshan Wignaraja (ed.), Production Networks and Enterprises in East Asia, edition 1, chapter 0, pages 33-64, Springer.
    19. Kunwang Li & Ligang Song & Xingjun Zhao, 2008. "Component Trade and China's Global Economic Integration," WIDER Working Paper Series RP2008-101, World Institute for Development Economic Research (UNU-WIDER).
    20. Amador, João & Cabral, Sónia, 2009. "Vertical specialization across the world: A relative measure," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 267-280, December.

    More about this item

    Keywords

    china; fragmentation; vertical specialization; trade growth;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bof:bofitp:2008_031. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/bofitfi.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Minna Nyman (email available below). General contact details of provider: https://edirc.repec.org/data/bofitfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.