Monday, 21 July 2008

How Much of Chinese Exports is Really Made in China?

Interesting NBER working paper to go on my "must read" pile.

"How Much of Chinese Exports is Really Made in China? Assessing Domestic Value-Added When Processing Trade is Pervasive"

NBER Working Paper No. W14109

ROBERT KOOPMAN, U.S. International Trade Commission
ZHI WANG, U.S. International Trade Commission
SHANG-JIN WEI, Columbia University - Columbia Business School, National Bureau of Economic Research (NBER), Centre for Economic Policy Research (CEPR)

As China's export juggernaut employs many imported inputs, there are many policy questions for which it is crucial to know the extent of domestic and foreign value added in its exports. The best known approach - the concept of vertical specialization proposed by Hummels, Ishii and Yi (2001) - is not appropriate for countries that engage actively in tariff/tax-favored processing exports such as China, Mexico, and Vietnam. We develop a general formula for computing domestic and foreign contents when processing exports are pervasive. Because this new formula requires some input-output coefficients not typically available from a conventional input-output table, we propose a mathematical programming procedure to estimate these coefficients by combining information from detailed trade statistics with input-output tables. By our estimation, the share of foreign content in China's exports is at about 50%, almost twice the estimate given by the HIY formula. There are also interesting variations across sectors and firm ownership. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly high foreign content (about 80%). Foreign-invested firms also tend to have higher foreign content in their exports than do domestic firms.


1 comment:

Anonymous said...

Great article! I am always looking for a story like this because I am also writing my own international trade blog at

Keep doing great works!