Chapter

A World Factory in Global Production Chains: Estimating Imported Value-Added in Exports by the People's Republic of China

Robert Koopman, Robert Wang and Shang–Jin Wei

in Costs and Benefits of Economic Integration in Asia

Published in print February 2011 | ISBN: 9780199753987
Published online September 2011 | e-ISBN: 9780199896783 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199753987.003.0009
A World Factory in Global Production Chains: Estimating Imported Value-Added in Exports by the People's Republic of China

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The rise of the People’s Republic of China (PRC) in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of foreign value-added (FVA) in exports. This chapter reviews a general formula in Koopman et al. (2008) for computing domestic and foreign contents when processing exports are pervasive. In addition, the chapter develops another formula for slicing up foreign content to allocate it among key individual economy’s supply chains, including sourcing from Japan and the United States (US). By the chapter's estimation, the share of foreign content in exports by the PRC is about 50%. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). By the chapter's estimation, Japan; the US; Hong Kong, China; and the European Union (EU) are the major sources of foreign content in the PRC’s exports of computers and consumer electronics, two of its largest and fastest growing export categories.

Keywords: domestic content; foreign content; processing exports; duty drawback; domestic value-added in exports; vertical specialization; global production chains; Chinese economy

Chapter.  14344 words.  Illustrated.

Subjects: Business and Management

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