Servicification and global value chain upgrading: empirical evidence from China’s manufacturing industry

Abstract

We investigate the effect of servicification on global value chain (GVC) upgrading within the context of China’s manufacturing industry. Utilising comprehensive data on manufacturing value-added, we present new evidence for the influence of servicification on the GVC position of the manufacturing industry in China. We find that although domestic and aggregate servicification enhances GVC, foreign servicification curtails the GVCs of manufacturing firms. Our results show that foreign direct investment, capital intensity and institutions are GVC enhancing. At the same time, the increased global market share of the Chinese manufacturing industry has reduced the GVC of manufacturing firms in China. From a policy perspective, the results highlight the need to take cognisance of the heterogeneity of manufacturing firms and the impact of domestic and foreign servicification on the GVC of manufacturing firms in China.

Highlights

• Total servicification and domestic servicification enhanced the GVC position of Chinese manufacturing industry.

• Foreign servicification worsened the GVC position of Chinese manufacturing industry.

• Foreign direct investment, capital intensity and institutions are GVC-enhancing, while increased global market share is GVC-impeding.

• The GFC exacerbated the adverse impact of foreign servicification on the GVC position of Chinese manufacturing industry.

Keywords:

• Servicification
• global value chain
• export value-added
• manufacturing industry
• China

JEL codes:

• *F14
• F23
• F68
• L60
• L80

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 The other two components are domestic value added returns home and pure double counting.

Additional information

Funding

This work was supported by the National Social Science Foundation of China (Grant No. 20BJY099 & 21DA095).

Notes on contributors

Yunsu Du

Dr Yunsu Du is Professor of Economics, School of International Business and Economics, Nanjing University of Finance and Economics, China. Prof. Du’s expertise are in the area of applied economics, development economics and international trade. Professor Du has published Chinese Papers in Finance & Trade Economics, Journal of International Trade, Economic Theory & Business Management.

Frank W. Agbola

Dr Frank W. Agbola is Professor of Economics at the Newcastle Business School, College of Human and Social Futures, University of Newcastle, Australia. Professor Agbola’s expertise are in the area of applied economics, development economics and agricultural economics. Professor Agbola has recently published in Economic Modelling, Applied Economics, Journal of Policy Modelling, Journal of the Asia Pacific Economy.