Study on entry of foreign capital and firm's value added in exports: from perspective of Chinese micro-enterprises' heterogeneity

ZHENG Danqing1,2 YU Jinping1

(1.Business School, Nanjing University)
(2.School of Economics, Henan University)

【Abstract】Based on data of Chinese micro-enterprises from 2001 to 2007, and this article conducted a measurement on the export trade value added to analyze dynamically the effect and influencing mechanism of foreign capital entering into China on the value-added trade ratio. According to the research, the existence of foreign capital prominently promotes the rising of value-added trade ratio of Chinese enterprises, while the pace and regularity of the entry of foreign capital produce an obvious inhibiting effect. Foreign capital from developed countries is a major driving force behind the rising the value-added trade ratio in China, while capital from Hongkong, Macao or Taiwan fail to play any prominent role. The level of industry technology is prominently a moderating effect on the extent to which the foreign capital existence can promote the value-added trade ratio of enterprise. However, its effect varies according to different sources of foreign capital. China should continue to give full play to the overflow effect of the entry of foreign capital, implement selective policies to attract capital, create fair market circumstances, elevate productivity of enterprises, improve investment in human resources and R&D, which is a necessary approach to promoting value added in exports, and promoting China to transit from a big trading nation into a trading power.

【Keywords】 added value of trade; foreign capital presence; pace of foreign capital entry; rhythm of foreign capital entry;

【DOI】

【Funds】 A Major Project of the Key Research Institute of Humanities & Social Science of the Minister of Education (2009JJD790022); National Social Science Foundation of China (12BJL080/13CJL019) Henan University Fund (2011YBRW003).

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    Footnote

    [1]. ① Calculated based on the UN COMTRADE Database. [^Back]

    [2]. ② Calculated based on the database of this article. Other data below, if there is not any indication, comes from the same source. [^Back]

    [3]. ③ Considering that enterprises’ export added value accounts for a certain percentage in their export volume, the increase in the export volume will definitely lead to more added value, but not necessarily added value rate. Therefore, the export added value rate can reflect changes in enterprises’ export added value more accurately. [^Back]

    [4]. ④ “Intermediate inputs” mentioned afterwards refer to physical intermediate inputs made by enterprises. [^Back]

    [5]. ⑤ The influencing mechanism of exchange rate on added value rate also deserves to be studies on. Considering length and purposes of this article, this issue is to be studied on afterwards. [^Back]

    [6]. ⑥ Considering that there might be co-linear relationships between variables, this articles conducted a variance inflation factor (VIF) inspection on all variables, and the VIF value concluded is between 1 and 1.76, much less than the critical value 10. Therefore, there does not exist a serious multiple co-linear relationship issue. [^Back]

    [7]. ⑦ Based on approaches of Anwar and Nguyen (2011), the manufacturing industry is divided into high-tech and low-tech sections, with high-tech valued 1 and low-tech valued 0. [^Back]

    [8]. ⑧ Considering the possible endogenous problem that industries of high export added value rate may attract more foreign capital invested, change in the number of enterprises in industries of comparatively low export added value rate between 2001 to 2007, such phenomenon is not found. Therefore, it is decided that the level of value-added trade ratio of the industry is not the reason why foreign capital enters. [^Back]

    [9]. ⑨ As shown in the grouping regression results of both domestic and foreign enterprises, foreign capital’s entry has a prominent facilitation effect on the added value rate of domestic enterprises, but not on foreign-funded enterprises themselves, which shows that foreign capital’s entry does have a certain type of spillover mechanism on the added value rate of domestic enterprises. [^Back]

    [10]. ⑩ After studying on changes in the number of enterprises in high-tech industries where there are the most and least foreign capital between 2001 to 2007, it is found out that there does exist a herd behavior. The number of foreign-funded enterprises in industries of higher foreign capital existence is so more than that of low foreign capital existence. [^Back]

    References

    Feng, D., Zhong, C. & Huang, Y. The Journal of World Economy (世界经济), (12) (2013).

    Zhang, J., Chen, Z. & Liu, Y. Economic Research Journal (经济研究), (10) (2013).

    Zheng, D. & Yu, J. Journal of International Trade (国际贸易问题), (8) (2014).

    Kee, H. L., Tang, H., (2012)“Domestic Value Added in Chinese Exports: Firm-Level Evidence,” World Bank.

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 12, Pages 96-107

December 2015

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Article Outline

Abstract

  • Introduction
  • 1 Theoretic mechanism and research hypothesis
  • 2 Model and measurement method
  • 2.3 Analysis on empirical results
  • 4 Conclusion and enlightenment
  • Footnote

    References