Exports, income and regional inequality in China: value chain analyses

Three of the most typical characteristics of China’s exports are: the large scale of processing exports; the important role of Foreign Invested Enterprises in exports; and the seriously unbalanced distribution of export activities across domestic regions. By fully taking these characteristics into account, this thesis offers new insights into several empirical questions about the income effects of China’s exports. It investigated the role of exports on national income growth (Chapter 3) and regional income inequality (Chapter 5), and the role of structural changes on income effect of exports (Chapter 2). Chapter 4 developed and constructed new interregional input-output (IO) tables for China. At the regional level, they explicitly distinguish the production of processing exports from ordinary production. The new IO tables were used to address the roles of processing exports and ordinary exports to regional economic growth. Not taking processing trade into full account at the regional level seriously biased the results

Processing trade in Chinese interregional input–output tables:construction and application

We construct new interregional input–output tables for China, which can be used to analyze changes in the interindustry linkages within and between eight Chinese regions, and their consequences. We claim that analyses based on these tables yield more accurate results than analyses using existing interregional input–output tables for China, because our tables explicitly account for a typical feature of the Chinse economy: the importance of processing exports activities. These activities rely heavily on imported inputs and much less on inputs sourced from domestic regions. Accounting for such differences between processing exports and other production activities reduces aggregation biases. We illustrate the usefulness of the tables by computing supply chain fragmentation indices for China and quantifying the biases that are avoided by using our input–output tables instead of conventional ones. We make our tables (for 2002, 2007 and 2012) publicly available.</p

Upgrading or downgrading:China's regional carbon emission intensity evolution and its determinants

One of China's major national targets is to environmentally upgrade its economy. In this paper, we define environmental upgrading as lowering the carbon intensity. The disparities among China's regions suggest to examine China's carbon emission performance at the regional level. For this purpose, we use inter-regional input-output tables (for 2002, 2007, and 2012) that distinguish processing exports from ordinary exports. The regional emission intensities (EIs) show environmental downgrading in the period 2002-2007 and upgrading during 2007-2012. To identify the determinants of the evolution of regional EIs, we have employed a multiplicative structural decomposition analysis. Changes in direct emission coefficients and changes in production technology are found to be the major determinants. However, next to these standard determinants, we also evaluate the effects on the changes in regional EIs of changes in inter-regional trade and changes in inter-regional spillovers. Changing inter-regional trade is found to have increased the EI significantly in western and central regions. This suggests that more "dirty" production was shifted from coastal to inland regions. Our study yields clear policy recommendations for achieving China's transformation to a low-carbon economy. (C) 2020 Elsevier B.V. All rights reserved

How much did China's emergence as “the world's factory” contribute to its national income?

Over time, China upgraded its capabilities to such an extent that it requires less imported materials, components, and services to maintain its central role in the global production network. Consequently, the domestic value added content of its exports has increased over time. Still, value added includes profits, which are partly earned by foreign capital owners, many of whom have set up operations in export processing zones. Such profits can be repatriated, and do not directly enhance the living standards in China. This paper will focus on the extent to which China's exporting activities have contributed to its Gross National Income (GNI), which is a better indicator of economy-wide living standards than GDP. Our results, based on input-output analysis, show that the increase in the share of Chinese GNI of a yuan of Chinese exports from 2002 to 2007 was modest, despite a marked growth of Chinese GDP contained in such a yuan of exports. From 2007 to 2017, however, the continued increase of domestic value added per yuan of exports did actually translate into considerably higher contributions of exports to GNI. Decomposition analyses show that changes in the commodity composition of China's export bundle and changes in the shares of national income in value added were the main cause of the different patterns before and after the financial crisis

Processing trade in Chinese interregional input–output tables:construction and application

We construct new interregional input–output tables for China, which can be used to analyze changes in the interindustry linkages within and between eight Chinese regions, and their consequences. We claim that analyses based on these tables yield more accurate results than analyses using existing interregional input–output tables for China, because our tables explicitly account for a typical feature of the Chinse economy: the importance of processing exports activities. These activities rely heavily on imported inputs and much less on inputs sourced from domestic regions. Accounting for such differences between processing exports and other production activities reduces aggregation biases. We illustrate the usefulness of the tables by computing supply chain fragmentation indices for China and quantifying the biases that are avoided by using our input–output tables instead of conventional ones. We make our tables (for 2002, 2007 and 2012) publicly available.</p

Exchange Rate Pass-through in China: A Cost-Push Input-Output Price Model

Relying on a cost-push input-output model for China, we estimate the exchange rate pass-through to both domestic prices and export prices at the industry level. Our empirical results indicate that the decline of the RMB price in the processing exports sector in response to an RMB appreciation is larger than that in the non-processing exports sector, which, in turn, is larger than the decline of the consumer price indexes. Our cross-sector analysis also suggests that exchange rate changes have the lowest impact on prices in capital- and technology-insensitive industries

Contributions of FIEs to China’s Economy Using an Input-Output Model Capturing Processing Trade with Ownership Distinction

Since China’s opening policy, low-cost labor force in China, preferential policies and China’s huge potential market are major drivers pushing foreign direct investment (FDI) flowing into China. FDI has greatly promoted China’s economic growth in the past three decades. Since 1993, China has become the second largest recipients of FDI in the world. Most of the inward FDI in China are used to set up foreign invested enterprises (FIEs), data from China’s Ministry of Commerce show that there has been more than 740 thousands FIEs established in China by April 2012. FIEs have become an important component of the Chinese economy. To shed light on the different roles of foreign invested enterprises (FIEs) and domestic-owned enterprises (DOEs) in China’s economy, in this paper we proposes a non-competitive input-output model with distinction of FIEs and DOEs capturing processing trade in China’s economy. The model divides China’s economy into six parts in order to capture the differences in production technology & structure between DOEs and FIEs, as well as between processing exports and non-processing exports. Based on the above model, we compile the special input-output table of China for 2007, conduct empirical analysis of the contribution by DOEs & FIEs to China’s economy and make a rough estimate of the contribution of EU FDI into China

Regional Inequality in China during its Rise as a Giant Exporter: A Value Chain Analysis

China's exports success has implications for regional income inequality, because most of its export products are manufactured in the coastal zone. We propose a value chain-based accounting framework to quantify the contributions of exports to regional income inequality. We employ newly developed interregional input–output tables for China, which distinguish between processing export activities and ordinary export activities. We analyze the period 2002–2012, the decade during which China became the “Factory of the World.” We find that an RMB of processing exports contributed much more to regional inequality than an RMB of ordinary exports or domestic final demand. Still, changes in regional inequality (increasing in 2002–2007 and decreasing between 2007 and 2012) are much more due to rising ordinary exports in the first subperiod and the growth of domestic final demand coupled with changes in the configuration of value chains in the second

Why has China's vertical specialization declined?

Vertical specialization (VS) is quantified by the VS share, which measures the average import content per dollar of exports. A characteristic of China's export trade is its strong dependence on assembly and processing activities. To take proper account of this, China's VS shares should explicitly distinguish processing export production from other production. We estimate China's annual VS shares from 2000 to 2012the latest year for which a special input-output table is available that makes such an explicit distinction. We find that VS shares increased from 2000 to 2004 and subsequently started to decrease. To explore why it has declined, we introduce a new structural decomposition approach. We find that the decrease of the VS share appears to have been driven mainly by the substitution of imported intermediates by domestic products. This occurred in particular in the production of exports, which implies an upgrading of China's position in global value chains