Domestic Value Creation in the Involvement in Global Value Chains: The Case of Chinese Economy

Abstract

This paper examines how the Chinese economy has been involved in global value chains from the perspective of domestic value creation, by using the OECD valueadded-trade data (OECD TiVA database). This study contributes to the existing literature by decomposing the domestic value creation into a direct effect from export industries and an indirect effect from the other supporting industries. The empirical estimation first identified the -smile curve‖ in the -indirect‖ domestic value creation in total manufactures as the average pattern of the Asian GVCs development paths, in which the domestic value share to exports declines at the early development stage and regains itself at the later stage with the turning point being at 1,830 US dollars as per capita GDP. Then the analysis confirmed the position of Chinese economy, which has already passed the Asian average turning point and has entered the phase of regaining the domestic value share to exports. Finally, the analysis found that the domestic value creation in China has originated from the development of supporting industries, in particular, service industries, which might reflect the progress in basic infrastructure there.Contribution/ Originality: This study contributes in the existing literature by enriching the evidence on the domestic value creation in the involvement in global value chains in Chinese economy, through using the updated OECD database of -Trade in Value Added: December 2016‖, and through decomposing the domestic value into direct and indirect effects.

Paths of economic development: a global evidence for the mediating role of institutions for participation in global value chains

“…Our study's findings are also in line with Taguchi (2018), who revealed a positive significant relationship between growth in GDP per capita and GVC participation in both developing and developed countries. Moreover, our results show that the coefficient of the economic freedom index, which we use as a proxy for institutional facilitation, is also positive and significant and is consistent with the results for GVC participation and growth.…”

“…Moreover, our GVCs participation index is measured in terms of value-added trade with annual frequency from 2000 to 2016, as opposed to the six periods that are available in OECD-TiVA database. The regression to assess the impact of GVCs participation and institutional facilitation on GDP per capita growth is based on the following specification given by Taguchi (2018):…”

The value‐added creation effect of industry position in global value chains: implications for Asia‐Pacific economies

“…Most studies assert that active participation in GVCs increases value‐added. In particular, patterns of participation in vertical specialisation linkages (forward and backward) and participating industries' positions on the production line (upstream or downstream) significantly affect the creation of the value‐added process of GVC participation (De Backer and Miroudot 2013; Van der Marel 2015; Ye et al 2015; Kummritz 2016; Kummritz et al 2017; Wang et al 2017; Taguchi 2018). Specifically, forward participation in GVCs as a seller of intermediate goods has been proven to generate more value‐added than backward participation in GVCs as a buyer.…”

The Effects of Global Value Chain Participation on Current Account Balances in African Economies: Does it Matter Being a Landlocked Country?: An Empirical Review

“…Value chain as a new approach to competitiveness has a lot of virtues in terms of value addition and the segmentation of activities [7]. The value chain concept describes the full range of activities that firms and workers perform to bring a product from its conception to end use and beyond including activities such as research and development, design, production, marketing, distribution and support to the final consumer [8].…”