Identifying the economic and environmental impacts of China's trade in intermediates within the Asia-Pacific region

Abstract

Using value-added and employment as the representatives of economic benefits and carbon emissions as the proxy of environmental costs of trade, this study analyzes the impacts of China's trade in intermediates with major trading partners in the Asia-Pacific region (Australia, Canada, Japan, Korea, Mexico, Taiwan, and the USA) on its economy and environment during 2000–2014 through hypothetical extraction method and structural decomposition analysis. Results show that China's trade in intermediates within the region induced a higher share of carbon emissions than those of value-added and employment. The economic and environmental impacts of China's trade in intermediates with the seven trading partners were mainly driven up by the intensifying international industrial linkages. Technical factors induced considerable negative effects on the impacted carbon emissions and employment. At the sectoral level, the expanding intermediate trade of heavy industries brought the major part of increasing impacts on carbon emissions, value-added, and employment. The impacted employment shifted toward high-skilled occupations, especially in heavy industries and services, and the impacted low-skilled employment decreased in most sectors. Finally, related policy implications are deduced.