China’s FTA Trade Partner Selection from the Perspective of Global Value Chain: Base on the Data of Trade Value Added

Abstract

The construction of free trade areas （FTAs） is an important strategic measure to promote China’s opening up since the 21st century. By the end of January 2021, China had signed 19 FTAs, and the construction of FTAs had begun to take shape. From the perspective of global value chain, how does the development of FTAs affect China’s foreign trade and economic growth? How should China choose the next FTA country objects? Based on the trade value added data of domestic and foreign countries in ADBMRIO and OECDICIO, this paper studies the impact of the number and level of FTAs on China’s trade value added through the expanded trade gravity model.The research shows that the establishment of FTAs has further enhanced the level of trade liberalization and trade facilitation between China and its members. At present, the role of the quantity of FTAs in China’s foreign trade is mainly driven from extensive margin, and the intensive effect of the depth of FTAs on the trade value added needs to be further deepened. Compared with the traditional trade activities, FTAs play a more prominent role in the global value chain activities of China and its member countries. Further studies on the heterogeneity find that, from the perspective of global value chain, the establishment of FTAs between China and developed countries and regions has the greatest driving effect on China’s foreign trade; the countries and regions with a high degree of FTA participation and established FTAs with China after the 2008 financial crisis have also significantly contributed to the improvement of China’s participation and competitiveness in the global value chain; the establishment of FTAs with neighboring and similar countries is still conducive to the improvement of China’s trade value added; but with the development of science and technology, the impact of geographical distance on foreign trade is gradually decreasing. Therefore, China should speed up the global strategic layout of FTAs, further improve the depth of FTA construction while increasing the number of FTAs, and accelerate the pace of FTA negotiations with major economies in the world.The main contributions of this paper are as follows: （1）Based on the traditional literature on the impact of FTAs, it reexamines the impact of FTAs on China from the perspective of global value chain, and analyzes the relationship between FTAs and the global value chain.（2）It expands and improves the existing methods and indicators of FTA hierarchy division, applies them to the analysis of China’s FTA construction, and explores the development and evolution path of China’s FTAs from the text interpretation of each FTA.（3）Based on the global input-output database and global value chain accounting database, it points out the direction of China’s next FTA trade partner selection through the heterogeneity analysis on the impact of the quantity and level of FTAs on China, and makes up for the lack of research in the field of FTA strategic choice.