The Chinese Ministry of Commerce (MOFCOM) has worked with the General Administration of Customs, the National Bureau of Statistics, and the State Administration of Foreign Exchange to entrust the Academy of Mathematics and System Science, the Chinese Academy of Sciences, to set up a research group to conduct systematic researches on China’s trade in value added and relevant topics since 2011. The research group has calculated China’s trade in value added with six large trading partners and employment promotion in 2010-2012, and completed the Accounting Report on Global Value Chains and China Trade in Value Added. Recently, MOFCOM Spokesman and Director-General of the Policy Research Department Shen Danyang made an interpretation on the report.
I. What’s the significance of computing the trade in value added compared with the traditional trade statistics ?
A: The statistical way of trade in value added could reflect export’s pulling effect on the GDP and the benefits distribution of all economies among the global value chains objectively. China’s exports totaled US$2.23915 trillion in 2012, accounting for 27.2% of the GDP. Computed on a value-added basis, China’s exports added value at home in 2012 amounted to US$1.43358 trillion, taking up only 17.4% of the then GDP.
It’s computed that in bilateral trade, China has a lower export added value per US$1,000 on trade with the U.S., the ROK and Japan (US$585, US$587 and US$599 respectively in 2012), compared with that of trade with India, ASEAN and the EU (US$695, US$661 and US$631 respectively in 2012), and the exports of processing trade is one main reason to produce differences of export added value among countries. On the added value China brought to our trading partners per US$1,000 by imports, the U.S. enjoys the highest added value (US$860 in 2012), followed by Japan, India, the EU and the ROK (US$790, US$779, US$740 and US$571 respectively in 2012). In 2012, China’s trade surplus with the U.S., the EU and India on an added value basis went down 54%, 56% and 36% respectively.
II. How was the pulling effect of trade in value added reflected?
A: China’s foreign trade boasts a large volume. Although we are in a mid and low end of the global value chains, our unit export plays an increasingly pulling role in added value. China has an overall low added value on unit export of trade in goods. In 2012, China had an added value of US$621 from US$1,000 of goods exports, compared with US$850 in the U.S. and US$700-800 in the EU and Japan. In the long run, as China’s manufacturing level has gradually been improved, parts used to rely on imports have been substituted by competitive domestic products, and the pulling effects of China’s unit export on added value have grown increasingly. China’s added value of per US$1,000 exports was about US$551 in 2002, and it rose to US$591 in 2007 and increased year after year to US$605, US$616 and US$621 respectively in 2010-2012. Among others, that from the processing exports was US$305, US$367 and US$386 respectively in 2002, 2007 and 2012 with a comparatively large range of increase. It expects to maintain such growth in the future.
The exports of traditional labor-intensive industries like agriculture, textiles and clothing, food and furniture manufacturing (per US$ 1,000 unit) have a higher domestic added value (US$800-900) while that of technology-intensive exports like machinery manufacturing and electronic products and petrochemicals have a lower domestic added value (US$400-700).
In addition, the unit added value of processing trade exports in 2012 (US$385) was less than half of that of conventional trade exports (about US$780). It must be said that although the exports of processing trade has a low value-added rate, it has played a multidimensional role in China’s economic development and has played and will continue to play an important role in China’s integration into global value chains.
III. Could you brief us on the jobs created by exports in China?
A: Although China’s unit export’s role in promoting employment is not obvious, that of the overall export has played a big part. In 2012, 59 jobs were created by every US$1 million goods export. Since China has a large amount of export volume, a total of 120.97 million jobs were created, of which 22.9 million were from the processing trade.
China’s imports have also brought many jobs to our trading partners. China’s unit imports have a most significant role in promoting employment in India, followed by the ROK, the EU and Japan, and the U.S. successively. In 2012, China’s imports created 4.97 million jobs in India, 2.412 million jobs in the EU, 1.637 million jobs in the ROK, 1.144 million jobs in Japan and 665,000 jobs in the U.S..
What’s the added value of service exports compared with that of the goods exports?
A: The trade in services plays an important role in the global value chains and the added value of its unit export is higher than that of the trade in goods. For example, in 2012, the domestic added value created by unit service exports (US$1000) reached US$848. The high value added services include communications services, insurance and financial services, and computer and information services. Construction services and royalties and licensing fees are relatively low.
V. How do you evaluate China’s participation in global value chains?
A: The more than three decades’ reform and opening up is a process of China’s integration into global value chains. With the expansion of China’s opening up, our participation in global value chains has also been upgraded steadily, with trade in goods and FDI absorption being the main channels at its early time and the “going global” and trade in services rising at a later stage. The later has played an increasingly important role in China’s overall participation in and climbing up global value chains. Over more than three decades’ efforts, China’s participation has positively promoted economic growth, enhanced employment, taxation and structure upgrading, and advanced efficiency improvement, technological progress and independent innovation, all of which has also further raised China’s position on the global value chains in turn.
VI. What’s the work plan going forward for the global value chains and trade in value added project?
A: The global value chains and trade in value added has become a hot topic among government departments, academic circles, and international organizations. The WTO, the OECD, the EU, the UNCTAD and the IDE-JETRO have conducted researches on international input-output database and trade in value added statistics successively, and the WTO/OECD are considering to incorporate factors of enterprises and production types into the heterogeneity study on the database. The Strategic Framework on Measurement of APEC TiVA under GVCs and the Action Plan on this Strategic Framework, passed by the 22nd APEC Economic Leaders' Meeting held in November 2014 will greatly drive relevant studies in the Asia-Pacific region including China and play an important role in enhancing cooperation in global value chains in the region. We will strengthen cooperation with relevant organizations in this respect, incorporate models and methods reflecting characteristics of processing trade into the international input-output database and statistics of the global value chains so as to better reflect the role and advantages all economies play in the global value chains.