Do Government Subsidies Affect Enterprises’ Global Value Chain Upgrading? From the Perspective of Export Domestic Value Added Raito

Abstract

At present, China is at an important historical moment of industrial transformation and upgrading and fierce global competition. Faced with the new situation, how to motivate the role of government subsidies in improving the export competitiveness of Chinese manufacturing enterprises has become an important topic for us to study. In recent years, the position of China’s manufacturing industry in the global value chain has risen, and the domestic value added（DVA）of Chinese manufacturing enterprises’ exports has risen by more than 10% in the period of 2000-2006. So, we cannot help asking how government subsidies affect the domestic value added ratio（DVAR）of enterprises’ exports, and what the underlying mechanism is.Based on the background of China’s integration into the global value chain, this paper analyzes the impact and mechanism of government subsidies on the DVA of Chinese manufacturing enterprises’ exports by using the matching data of China’s industrial enterprise database and Customs trade database from 2000 to 2013.The results show that government subsidies have a positive impact on enterprises’ DVAR. Heterogeneity analysis shows that, government subsidies have the biggest effect on export DVAR of pure ordinary trade enterprises, next are mixed trade enterprises, and the last are pure processing trade enterprises. Also, government subsidies have a significant impact on export DVAR of private enterprises, but their impact on DVAR of state-owned enterprises and foreign enterprises is not obvious. The mechanism analysis shows that government subsidies have a positive impact on enterprises’ DVAR through the innovation incentive effect”. Lastly, the dynamic decomposition results at the industry level show that, the contribution of the intra-firm effect and the resource reallocation effect is 49% and 51% respectively. Further empirical analysis shows that, the resource reallocation effect is an important way by which government subsidies promote the industry DVAR growth.The above findings not only provide some micro evidence for objectively evaluating the effect of Chinese production subsidies, but also provide beneficial reference for using the government policy to enhance export competitiveness in the global value chain system. Firstly, enterprises should make full and reasonable use of government subsidy funds. Meanwhile, enterprises must attach great importance to technological innovation, increase investment in R&D, think highly of independent intellectual property rights, and develop and cultivate core technologies, so as to promote the upgrading of enterprises’ production links from the low end of the value chain to the middle and high end of the value chain. Secondly, the government should encourage domestic general trade enterprises to import high-quality, low-cost and diversified intermediaries, cultivate and improve the domestic intermediary market through the technology spillover effect, and then enhance the export DVAR of processing trade enterprises. Finally, the government should fully realize that the industrial support policy plays a positive role in promoting the status of Chinese enterprises in the global value chain, and should devote itself to formulating a reasonable enterprise subsidy policy so as to give full play to the positive role of the government as a visible hand”.In a word, the possible expansion of this paper is mainly embodied in the following three aspects: Firstly, it will help us to further understand the differential impact of government subsidies on enterprises’ export DVAR. Secondly, it is conducive to enhancing our understanding of the mechanism of government subsidies affecting enterprises’ export DVAR. Thirdly, we inspect the contribution source of industry export DVAR and the role of the resource redistribution effect in it from the perspective of the medium-sized industry, which provides beneficial enlightenment for China to improve its export competitiveness under the background of the global value chain.