International Review of Economics and Finance (xxxx) xxxx–xxxx
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International Review of Economics and Finance
journal homepage: www.elsevier.com/locate/iref
China's electrical equipment manufacturing in the global value chain: A GVC income analysis based on World Input-Output Database (WIOD)☆
a School of Economics, Shanghai University, Shanghai 200444, China
b Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, Australian National University, Canberra 2601, Australia
A R T I C L E I N F O
JEL codes:
C67 F14 L63
Keywords:
Global value chain (GVC) Input-output analysis GVC income
China
Electrical equipment manufacturing
A B S T R A C T
This paper empirically analyzes China's electrical equipment manufacturing industry in the context of global value chain (GVC) by using the GVC income approach and the World Input- Output Database (WIOD). Four major questions are addressed by measuring several different indicators. China is found to have comparative advantage and competitiveness in terms of its large share of value added contribution in the world electrical equipment manufacturing industry. However, such competitiveness is not sustainable. The paper also finds that the global financial crisis did have certain impact on the electrical equipment GVCs in general, but the impact is not necessarily negative and big.
China has been called the “world factory” for its mass production of goods for the whole world. Since its entry into WTO in 2001, China's gross exports have grown more than 6 times by 2013.1 In particular, according to the WTO data,2 China was the largest exporter of electronic data processing and office equipment and integrated circuits and electronic components in 2013 while in 1995 it only ranked 10th in the world. For China, electrical equipment accounts for the largest share of exports, even more than textile products which once ranked first on Chinese exports list. Therefore, China's electrical equipment industry is important not only for China but also for this industry in the world. However, as some recent studies have pointed out, the domestic value added embodied in Chinese electrical equipment exports are actually low (about 30% or less according to Koopman, Wang and Wei (2012)). The label “Made in China” also implicitly says “cheap and low quality” for many people. In such context, the analysis based on exports data is no longer indicative; instead, the concept of “global value chain” is more suitable for such analysis.
Since the seminal work by Hummel, Ishii and Yi (2001), the concept of “vertical specialization” has been developed such that the “value chain” in business management has been extended to the “global value chain” (GVC) in a larger picture. In a review of GVC analysis, Gereffi and Fernandez-Stark (2011) identified four dimensions of GVC analysis: input-output structure, geographic scope, governance and institutional context. In the four dimensions, input-output structure is the basis for GVC analysis. However, due to the
☆ The author would like to thank Donald Lien and the participants of “The 2nd International Conference on The Chinese Economy: Past, Present and Future” in Beijing on December 21st, 2015 for their helpful and stimulating comments.
⁎ Correspondence address: School of Economics, Shanghai University, Shanghai 200444, China.
E-mail address: yingying_lu@shu.edu.cn.
1 Annual exports data is from National Bureau of Statistics of China, 2014, available at http://data.stats.gov.cn.
2 Based on data from WTO “Time Series on International Trade”, available at http://stat.wto.org/StatisticalProgram/WSDBStatProgramHome.aspx?Language=E.
http://dx.doi.org/10.1016/j.iref.2017.01.015
1059-0560/ © 2017 Published by Elsevier Inc.
Please cite this article as: Lu, Y., International Review of Economics and Finance (2017),
http://dx.doi.org/10.1016/j.iref.2017.01.015
double accounting problem and multi-country production chain, the conventional trade data has become less reliable to measure the value contributed by a country (Johnson amp; Noguera, 2012). Therefore, measures, such as trade in value added (TiVA) and value added exports (VAX) ratio, are proposed (see Johnson amp; Noguera, 2012 and Koopman, Wang and Wei, 2010, 2014). Various measuring indicators are also defined to map the network or mechanism of the GVCs: for example, GVC_participation index and GVC_position index by Koopman et al. (2010); length index and upstreamness measure by Antràs, Chor, Fally, and Hillberry (2012) and Fally (2012). These studies heavily rely on the integration of national
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