China’s Industrial Upgrade in Global Factor Specialization

Jin Jing，Dai Xiang and Zhang Er-zhen
School of Business, Nanjing University, Nanjing, China
Anhui University of Finance and Economics, Bengbu, China

Abstract: China has operated as a proactive destination of technology transfer and diffusion from the Western world since reform and opening-up in 1978. This enabled the country to seize strategic opportunities of global factor specialization and helped it achieve great industrial development and upgrade. Nevertheless, the traditional path of integration into the global system of factor specialization has also brought about problems of imbalance and incoordination such as an excessive consumption of natural resources and environmental damage, making it necessary for China’s industrial development to increase sustainability. Deepening of global factor specialization, increased cross-border liquidity, and the strategy of “reverse integration” of multinational firms based on developing economies are tendencies highly consistent with the direction of China’s industrial development and upgrade and present new strategic opportunities for integration into global factor specialization and industrial transformation. Rather than simply acting passively as a destination of foreign investment, a new round of opening-up is required for China to take a more efficient route in the global system of factor specialization. Therefore, in the area of industrial development, China must keep a down-to-earth attitude, effectively utilize the existing comparative advantages, and follow a gradual and science-based approach. Only by following this course will China be able to take advantage of the new opportunities, foster advanced indigenous and international factors, and increase its capabilities of innovation and global operation on the basis of global resources integration.
Keywords: factor specialization, industrial upgrade, comparative advantage

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