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Foreign Investment and Vertical Specialisation: Emerging Trends in Chinese Exports
Author(s) -
Sharma Kishor,
Wei Wang
Publication year - 2014
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12084
Subject(s) - foreign direct investment , accession , globalization , clothing , international trade , investment (military) , international economics , business , economics , commerce , market economy , european union , politics , political science , law , macroeconomics , history , archaeology
This paper contributes to the debate about the role of foreign direct investment ( FDI ) in vertical specialisation in C hinese exports. Globalisation of the world economy, together with well‐developed physical infrastructure, and falling costs of transport and communications, has led to a significant increase in foreign investment into C hina to take advantage of its comparative advantage in labour‐intensive activities. Initially, foreign investment came to simple assembly line (such as textile, clothing, electronic goods), but gradually, C hina attracted FDI to sophisticated manufacturing industries (such as, information and communications technology products, office and medical equipments etc.). As C hina became increasingly open following its accession to the World Trade Organisation, the share of vertical specialisation in its exports appears to have increased. Over one‐quarter of C hinese exports appears to be due to the expansion of back‐and‐forth transactions in vertically fragmented cross‐border production process, which has significant implications for policy formulation.