Impact of Global Value Chain Embedding on Total-Factor Energy Productivity of Chinese Industrial Sectors

Abstract

In the four decades since China’s reform and opening up, China has been playing an active role in global value chain (GVC) due to its abundant resources. China has gained enormous benefits from opening up, but has also suffered huge energy costs in the process. In this study, we incorporated global value chains and energy consumption into a unified analysis framework and calculated the energy total-factor productivity (ETFP) of China’s industry and the degree of participation in GVC. In addition, in order to discover the contradictions and problems between China's participation in global value chains and the improvement of total energy factor productivity, the panel smooth transformation model (PSTR) was used to empirically test the nonlinear relationship between the ETFP and the degree of participation in GVC in China. From the analysis results, GVC participation, as well as the subdivided shallow GVC participation and deep GVC participation, first promoted the effect on ETFP and then suppressed it, showing an inverted U-shaped single threshold characteristic. The results indicated that in the progress of starting to participate in the GVC, the effect of technological progress of the GVC overweighed the scale effect of energy consumption, resulting in the growth of ETFP. However, due to the gradual reduction of technology dividends and the “low-end lock-in” situation, China was placed in the value chain by the developed countries, and the technological effect was gradually smaller than the scale effect of energy consumption. As a result, the increase in the total-factor productivity of energy was inhibited. At the same time, in the further examination of industry heterogeneity, the inverted U-shaped influence trend was more significant in high energy-consuming industries. The conclusions of this study can provide a new perspective and policy focus for China's participation in GVC to achieve the goal of increasing ETFP.

Global Value Chain and Total Factor Productivity in Africa

“…However, whether GVC promotes the productivity growth or not remains an empirical question that needs empirical answers. The few studies conducted in this area reveal some interesting results which remain inconclusive, while little is known about the case of developing countries such as Africa (Yanikkaya & Altun, 2020;Feng et al, 2020;Liu & Saam, 2021). Our study fills this important gap and provides new evidence for the case of African countries.…”

“…Both backward and forward participation contribute to the development of an efficient production system in the economies under consideration. Feng et al (2020) utilized the panel smooth transformation model (PSTR) to analyse the data and found that China's energy sector benefits from GVC participation due to an improvement in total factor productivity. Their analysis shows that there is a U-shaped relationship between the two variables.…”

“…Baldwin (2013) discussed the phenomenon of engaging in value chains, which makes industrialization fundamentally faster and less complex because the supply-chain industry is less uneven and domestically interconnected. A number of studies reviewed above show that a country's integration into the GVC would improve its productivity and efficiency (Feng et al, 2020;Ayadi et al, 2020). Criscuolo and Timmis (2017) provide the channels of the relationship between GVC and productivity.…”

“…In the new millennium, global value chain (GVC) has reshaped the pace for economic development leading to changes in global division of labour and fragmentation processes for borderless production system (Feng et al, 2020). Reduction in the cost of transportation and communication coupled with elimination of trade barriers in relation to trade and foreign investment has led to an expansion in globalization and GVC in particular (Foster-McGregor et al, 2016).…”

Pathway to green growth: A panel-ARDL model of environmental upgrading, environmental regulations, and GVC participation for the Chinese manufacturing industry

“…It depicts that increased TPLI is a sign of industrial upgrading, which ultimately affects the energy intensity of the manufacturing industry (Wang et al, 2020). Moreover, increased participation in GVCs leads to higher technological progress, thus resulting in the growth of total factor energy productivity (Feng et al, 2020). The effect of IS on GTFEP is also positive, but insignificant.…”