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Domestic content in China’s exports and its distribution by firm ownership

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  • Ma, Hong
  • Wang, Zhi
  • Zhu, Kunfu

Abstract

Processing trade and foreign-invested enterprises (FIEs) account for a large share of total Chinese exports. In producing exports, they also use imported inputs disproportionately, which complicates the measurement of domestic content embedded in exports and the distribution of income generated from exports. In this paper, we extend the method developed by Koopman et al. (2012) to further distinguish between Chinese exports by FIEs and Chinese-owned enterprises (COEs), in addition to processing and normal exports. We propose an accounting framework and a detailed estimation procedure that separately account for the production and trade activities of FIEs and COEs. First, we decompose gross exports into domestic and foreign content by firm types. Then, we estimate factor ownership by firm types based on enterprise surveys. Finally, we compute the distribution of domestic content by factor ownership. Empirical estimation is based on China’s 2007 benchmark input–output tables, supplemented by detailed trade and production statistics. Firm heterogeneity within each industry is identified by linking the NBS enterprises survey and the Customs’ firm-level trade data. The empirical results from 2007 indicate the following: (1) domestic content accounted for around 59% of total exports; (2) FIEs operating in China created nearly 45% of the domestic content in Chinese exports, whereas processing COEs only contributed by less than 5%; (3) in terms of income distribution, about 52.6% of the value of Chinese exports was captured by foreign factor owners.

Suggested Citation

  • Ma, Hong & Wang, Zhi & Zhu, Kunfu, 2015. "Domestic content in China’s exports and its distribution by firm ownership," Journal of Comparative Economics, Elsevier, vol. 43(1), pages 3-18.
  • Handle: RePEc:eee:jcecon:v:43:y:2015:i:1:p:3-18
    DOI: 10.1016/j.jce.2014.11.006
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    References listed on IDEAS

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    18. Mao, R., 2018. "A Firm-Level Reappraisal of Real Exchange Rate Undervaluation in China s Agricultural Exports and Growth," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276987, International Association of Agricultural Economists.
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    More about this item

    Keywords

    Domestic content; Foreign content; Processing exports; Global value chain; Vertical specialization;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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