International Investment Studies
Working Paper No.201504
May 3, 2015
Outward FDI, The Extension of Production Chains
and Upgrading of China’s GVCs
LI GUOXUE
Abstract:Due to lack of key technology and well-known brands, most Chinese firms are locked in "low end" in global production networks. With the "demographic dividend" is gradually disappearing, China's is faced with serious challenges. It is urgent for China to promote the Upgrading of GVCs. In globalproduction networks, the upgrading of GVCs is mainly embodied by the shift from low value-added manufacturing and processing stages to high value-added R&D and marketing stages. In order to enhance China’s capacity to create and capture value-added, China should develop a MultinationalDiamond Modelwith China as thecore by the extension of production chains driven by outward FDI.At the firm level, Chinese firms should transfer low-end marginal industry or segments of production chains to other developing countries , and be linked to high-end advantageous industries in developed countries. At the government level, China together with other countries should promote facilitation of investment and tradealong “One Belt, One Road”.
Keywords: Global Production Networks,Outward FDI, Upgrading of GVCs
In the global production networks, the international division of labor is beyond industry and into intra-product. Even in the labor intensive industry, there are capital and technology intensive segments, and in capital and technology intensive industry, there are still labor intensive segments. So, upgrading of industrial structure is mainly embodied by upgrading of GVCs.
1. The Connotation of Upgrading of GVCs
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2.China’s “World Factory” Position in a Dilemma
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3. The Extension of Production Chains: A Solution to the Dilemma
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4. The Ways to Develop Multinational Diamond Model
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