China's Industrial Structure and its Changes in Recent Years: An Analysis of the 1997-2005 Input-Output Tables

This paper investigates the features and recent changes of China's industrial structure using input-output tables for different periods from 1997 to 2005. We find that the domestic production inducement coefficients of China's material and machinery industries have declined while the import coefficients of these industries have risen. This indicates that China has strengthened its position as "the factory of the world", in which it imports parts and materials, processes or assembles them, and then ships the final products. It also indicates that China's resource-securing activities have increasingly intensified because of the increasing demand for resources and energy associated with its high economic growth. We then calculate the degree of China's income dependence on foreign demand, which shows a dramatic rise, especially after 2002, shortly after China joined the WTO and embarked on liberalizing a wide range of markets including those of both goods and services. Lastly, it is shown that the labor input inducement coefficient for the agriculture sector is by far the largest and that the rates of labor input inducement differ significantly by industry depending on whether they are labor intensive or not. Labor input inducement coefficients have also been on the decline in most of the industries reflecting the improvement of labor productivity. Behind this trend is the migration of rural workers to urban areas and increased capital equipment especially in the manufacturing sector.