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Chinese Journal of Management Science ›› 2019, Vol. 27 ›› Issue (5): 68-77.doi: 10.16381/j.cnki.issn1003-207x.2019.05.008

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Analysis on China's Degree of Dependence on Foreign Trade in the View of Global Value Chains

LIU Peng1, XIA Yan2, LIU De-Ge1   

  1. 1. School of Business, Guangzhou University, Guangzhou 510006, China;
    2. Institute of Science and Development, Chinese Academy of Sciences, Beijing 100190, China
  • Received:2017-06-15 Revised:2017-12-28 Online:2019-05-20 Published:2019-05-25

Abstract: Global value chains are important for developing countries. One country had to build complete production chains to produce and sell goods in the international market in the past. However, in the era of GVCs, one country does not need to build complete production chains, and have opportunities to produce intermediate goods imported by other countries to embed in GVCs. So, embedding in GVCs has promoted China's economic development fastly. On the other hand, it makes China more dependent on foreign markets, and increases China's country risk which means risk coming from other countries when participating in international activities. The problem is that GVCs makes traditional index difficult to accurately measure the degree of dependence on foreign trade, because goods exporting to other countries may contain other countries' value-added. The consequence is that traditional index may overestimate the degree of dependence on foreign markets. Another problem is that methods in literature do not distinguish foreign trade from trade for GVCs. So, based on the perspective of GVCs, a method is constructed in this paper to calculate the degree of value-added of dependence on foreign trade using the world input-output model, different calculation methods in literature are compared, and the degree of dependence on foreign trade is proposed in the traditional trade and in the global value chains of the simple and complex participation. Finally, world input-output tables from 2000 to 2014 are used to calculate. The results show that the degree of external dependence of China increases firstly and then falls down; the primary cause of changes in dependence degree of our country on foreign trade is changes in the degree of dependence on foreign trade in the traditional trade. It is implied that the key to balance the global value chain embedded and external dependence is to improve the degree of participation in the global value chains. This paper can be helpful for China's government in the following aspects. First, a new index is supplied to assess risk from foreign goods markets. Second, the result that China's degree of economic dependence on foreign trade is smaller can be employed in trade negotiation and increase China's negotiation advantage. Third, it can be helpful for making policies. For example, China not only encourages firms to participate in globalization by traditional trade, but also by trade for GVCs.

Key words: degree of dependence on foreign trade, value-added, final demand, world input-output model

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