China’s Industrial Upgrading and Value Chain Restructuring Under the New Development Pattern

Ni Hongfu1* and Tian Ye2

1 Institute of Economics, Chinese Academy of Social Sciences (CASS), Beijing, China

2 Business School, Xiangtan University, Xiangtan, China

Abstract: Global industrial chains (GICs) have become a hallmark of the world economyunderpinning the global production cycle. Since the reform and opening up was introducedin 1978, China has taken an active role in global value chains (GVCs) and become theworld’s factory floor. Under the external shocks to GICs, such as US trade frictions withChina and the COVID-19 pandemic, China’s traditional comparative advantages inmanufacturing which include its labor force and costs are waning. This has manifested in awave of industrial relocations from China to other countries as well as China’s weakeninginternational competitiveness. We took stock of the concepts and journey of GVCs andelaborated the intrinsic relationship between GVCs and the new development pattern of“dual circulations”. We also analyzed the trends of GVCs, the current status and problemsof China’s industrial chains, and China’s market heft, complete industrial chains and thedigital economy as new strengths for industrial chain upgrade. In our conclusion, this paperput forth some policy recommendations for China’s industrial chain upgrade in the contextof dual circulations.

Keywords: industrial chains, industrial relocation, new development pattern, GVCs

JEL Classification Code: F15

DOI: 10.19602/j.chinaeconomist.2021.09.03