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How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive

  • Robert Koopman
  • Zhi Wang
  • Shang-Jin Wei

The rise of China in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of domestic value added (DVA) in exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By our estimation, the share of domestic content in exports by the PRC was about 50% before China's WTO membership, and has risen to over 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).

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File URL: http://www.nber.org/papers/w14109.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14109.

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Date of creation: Jun 2008
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Handle: RePEc:nbr:nberwo:14109
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  1. Rodrik, Dani, 2006. "What's So Special about China's Exports?," Working Paper Series rwp06-001, Harvard University, John F. Kennedy School of Government.
  2. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  3. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters, in: China's Growing Role in World Trade, pages 63-104 National Bureau of Economic Research, Inc.
  4. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  5. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR;CES;MSH, vol. 23, pages 5-49, 01.
  6. Goh, Ai Ting & Olivier, Jacques, 2004. "International Vertical Specializations, Imperfect Competition and Welfare," CEPR Discussion Papers 4311, C.E.P.R. Discussion Papers.
  7. Menzie D. Chinn, 2005. "Supply Capacity, Vertical Specialization and Tariff Rates: The Implications for Aggregate U.S. Trade Flow Equations," NBER Working Papers 11719, National Bureau of Economic Research, Inc.
  8. Robert Z. Lawrence, 2008. "Blue-Collar Blues: Is Trade to Blame for Rising US Income Inequality?," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa85, December.
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