A quantitative analysis of global value chains: why has domestic value-added of China’s exports increased?

Abstract

This paper focuses on the participation of China into global value chains. First, this paper measures the domestic value-added (DVA) of China’s exports during 2000–2014 based on the World Input–Output Database. The results confirm that the gap between the DVA and gross exports varies between countries and composite industries. Second, this paper uses a structural decomposition analysis to examine nine determinants that affect the change in DVA of China’s exports over time. Moreover, the result of the analysis of China is compared with those of Japan and the USA. Four notable facts are found. First, although the export share of high-technology manufacturing goods has risen significantly, the change in export structure failed to increase the DVA of China’s exports effectively. Second, the substitution of domestically produced intermediate inputs for imported intermediate inputs raised the DVA of China’s exports after the mid-2000s, while it decreased the DVA of Japan and the USA’s exports in most time. Third, the rise in DVA of China’s exports was accompanied by the substitution of labor income for capital income. However, the same result was absent in Japan and the USA. Finally, the increases in labor productivity and wage per person contributed greatly to the growth in DVA of China’s exports.