The densification of Chinese production chains in the context of vertically fragmented production

Abstract

Industrial densification is illustrated by greater involvement of local actors in value chains, and a lower degree of industrial density is commonly presented as an attribute of in-depth integrated economies into global value chains (GVC). This paper contributes to the characterization of China's industrial densification using an empirical strategy that is not limited to a proxy of GVC participation. Our results indicate that China has intensified the process of industrial densification over the post-Global Crisis period, especially high-technology-oriented industries, fostering domestic demand for final and intermediate goods and services produced domestically. This means that strengthening local actors' productive links is consistent with the Chinese strategy of reducing dependence on imported inputs, increasing the share of intermediate and final goods and services produced domestically, and spurring China's local production importance in innovative industries.