Low-End Lock-In of Chinese Equipment Manufacturing Industry and the Global Value Chain

Abstract

This paper focuses on the low-end lock-in problem faced by China’s equipment manufacturing industry, which is heavily involved in the global value chain (GVC). Specifically, we use the production chain length system and total trade accounting framework to measure some physical and economic location indicators. The physical location measures the forward production length, backward production length, and the location index, whereas the economic location measures various types of value-added in industry exports. The results show that China’s equipment manufacturing industry has deepened its physical and economic low-end lock-in with the gradual deepening of China’s equipment manufacturing industry’s participation in GVC. From a segmented perspective, the manufacture of fabricated metal products (except machinery and equipment) and electrical equipment has the deepest degree of low-end lock-in physical location; the manufacture of computer, electronic, and optical products has the deepest degree of economic low-end lock-in. Therefore, China should accelerate its breakthroughs in the low-end locking dilemma and climb the GVC by adopting various measures such as accelerating the implementation of the intelligent manufacturing strategy, developing service-oriented equipment manufacturing industries, cultivating the domestic market, realizing low-carbon manufacturing, and improving enterprises’ independent innovation capabilities.

Designing benefit distribution driven innovation strategy for local enterprises under the global value chain system

“…Third, the R&D by local enterprises can redistribute the revenue of the global value chain, local enterprises can get more revenue distribution due to the R&D activities. This basic finding ties well with previous studies wherein that local enterprises can improve their benefits in the global value chain through R&D activities (Li et al, 2020; Reddy et al, 2020). However, when comparing our results to those of previous researches, it must be pointed out that the R&D by local enterprises can also increase the total revenue of the global value chain, although the increase rate is not obvious.…”

“…Third, the R&D by local enterprises can redistribute the revenue of the global value chain, local enterprises can get more revenue distribution due to the R&D activities. This basic finding ties well with previous studies wherein that local enterprises can improve their benefits in the global value chain through R&D activities (Li et al, 2020;Reddy et al, 2020).…”

“…Sun and Grimes (2016) highlighted that continued dependence on foreign technology will only allow China to undertake low‐value‐added production activities in the global value chain system. Li et al (2020) argued that through independent innovation, it would be possible for local enterprises to raise their role in the global value chain system. Reddy et al (2020) also have similar beliefs that independent innovation is the root driving force for companies to participate in global value chains.…”

The impact of green technology innovation on global value chain upgrading in China’s equipment manufacturing industry

“…In recent years, China's equipment manufacturing industry has been embedded in GVC by relying on its advantages such as population and resource endowment (Xu et al, 2015). However, compared with developed countries, China's equipment manufacturing industry is engaged in lowend expansion and low value-added production, resulting in the loss of core technologies and the lack of innovation ability (Li et al, 2020a). In addition, the "low-end locking" and "high-end blocking" in GVC dominated by developed countries have formed obstacles for China's equipment manufacturing industry to jump to the high-end links, weakening China's initiative and discourse power in international trade (Li et al, 2020b).…”

Can the extension of the global value chain production length promote carbon emissions reduction in China's equipment manufacturing industry?

“…On the other hand, some scholars believe that although integration into GVC is the driving force of economic growth in developing countries, it will also cause huge carbon emission reduction pressure (Sun et al, 2019 ; Wang et al, 2019 ). China's manufacturing industry has a very high degree of "backward participation" in GVC (Li et al, 2020a ; Zhang et al, 2021a , 2021b ), and the effect of "low-end lock-in" is obvious (Li et al, 2020b ). China's manufacturing industry has gradually become a typical high-consumption and high-pollution industry in China in the process of participating in GVC (Wang & Feng, 2020 ).…”