The “International Trade Research Trend” section aims to release the latest research findings in the field of international trade published in authoritative Chinese journals such as “Social Sciences in China,” “Economic Research Journal,” “Journal of Management World,” “China Economic Quarterly,” and “The Journal of World Economy.” It strives to provide everyone with timely, accurate, and high-quality front-line dynamics in the field of international trade.

Economic Research Journal

Value Chain Length, Structure Change of Export Enterprises and New Pattern of Development

LI Xiaoping, YU Yuan, YUAN Kaihua and GAO Xiang   

Summary: As the international environment becomes increasingly complex and the advantages of the large-scale domes ‐ tic market become more prominent, Chinese enterprises deeply integrated into the global value chain are entering a criti ‐ cal juncture of coexisting risks and opportunities . In this context, guided by the new  development pattern, how can we comprehensively delineate the characteristics of value chain length changes among different export enterprises and pro ‐ mote the interaction between domestic and international circulation? This is both an important opportunity to form a pat ‐ tern where domestic circulation promotes external circulation and a necessary path to expand high-standard opening up.

To address this question, this paper leverages the dual advantages of macro value chain length and domestic value- added rate calculations at the micro enterprise level. We decompose the value chain length of export enterprises into three segments: domestic circulation, which focuses on the domestic market; interactive circulation, which connects domestic and  international markets ; and  external circulation, which  fully relies  on  external markets . Using  data  from  the World Input-Output Database (WIOD) (2016), the China Industrial Enterprise Database, and China’s customs import and export database, we systematically examine the structural changes in the value chains of Chinese enterprises and the current sta ‐ tus of domestic and international circulation.

The study reveals the following findings . First, the paper not only captures the individual differences among enter ‐  prises but also uncovers new characteristics at the overall level, including the rapid increase in domestic circulation, a de ‐  cline in interactive circulation, and the fastest decrease in external circulation behind the extension of export enterprises ’ value chains . These findings highlight the development dilemmas of China’s manufacturing industry, including “ domestic  and international circulation separation ”and “blocked technology spillovers ”. Second, unlike the multi-cycle coordinated  improvement in general trade, non-general trade exhibits a  significant separation of domestic and international circula ‐  tion. This feature is more pronounced in domestic enterprises, low-technology sectors and central-western regions, which  are characterized by weak import capacity, low division of labor coordination and insufficient industrial support. Third, al ‐  though the results of the econometric model indicate that the substitution characteristic of domestic circulation for interac ‐  tive circulation is robust, this paper finds that enhancing import capacity, digital intelligence levels, and industrial support  can mitigate the substitution effect of domestic circulation on interactive circulation based on the sequential production  characteristics of “ import input decision→ internal enterprise collaboration→ domestic downstream support ”in interactive  circulation.

Compared with existing literature, our work supplements and improves upon the following aspects .

Firstly, by establishing a research paradigm capable of identifying the value chain length of different enterprises and connecting heterogeneous trade theories with value chain accounting, we detail the characteristics of value chain length changes among various types of entities . This approach effectively avoids the issues of macro  studies failing to account for individual differences (trade types, ownership categories, and regional spaces) and micro studies transmitting macro calculation biases and high repetition ratios .

Secondly, based  on  the  division  of labor  characteristics  coexisting  in  a  complex  international  environment  and  a large domestic market, we systematically decompose the value chain length of enterprises into domestic circulation, inter ‐ active circulation, and external circulation. This framework helps to understand the changes in value chain length from the perspective of dual circulation and addresses the lack of consideration for enterprise economic circulation, especially the interaction between domestic and international circulation, in related research.

Thirdly, by comparing the circulation preferences and division of labor differences among different enterprises, we identify the “ domestic and international circulation separation ”pain points where interactive circulation continuously de ‐ clines as domestic large circulation promotes value chain extension. We explore paths to coordinate the extension of do ‐ mestic and interactive circulation, enriching theoretical understanding and practical solutions for enterprise value chain changes under the new pattern of development.

In summary, this paper not only expands the theoretical research outcomes on value chain length and broadens the boundaries of dual circulation studies but also provides policy insights and decision-making references on how to enhance interactive circulation levels and build autonomous and efficient industrial chains under the new pattern of development.     

Key words: Enterprise Value Chain Length; Structure Shape Change; Interactive Circulation; New Pattern of Develop ‐ ment; Global Value Chain

JEL Classification: F13, F14, F15

Journal of Management World

Effect Assessment of Domestic and International Dual Circulation in Hedging the Economic Cost of "Friend-shoring"

Qian Xuefeng and Zhou Wenqian

Summary:  In  recent  years,  the  United  States  has  focused  on  revitalizing  the  economy  and  restoring  supply chains by implementing the "friend-shoring" policy among allies and partner countries. Research by World Trade Or ⁃ ganization suggests that, this policy could potentially reduce global GDP by approximately  5% in the long run. Based on this, we discuss the following questions: What are the quantitative impacts of the "friend-shoring" policy on China and other countries? Through which channels are these policy effects transmitted? Can China mitigate the negative im ⁃ pacts of this policy through promoting domestic and international dual circulation?

This paper constructs a comprehensive general equilibrium model that spans multiple countries, regions, and sec ⁃ tors, focusing on the Indo-Pacific Economic Framework (IPEF), to analyze the  "friend-shoring" policy from three key perspectives: increasing tariff costs, enhancing non-tariff barriers, and severing input-output linkages. The study aims to  identify  the  specific  economic  costs  of  "friend-shoring"  and  examine  the  economic  effects  of  promoting  domestic and international dual circulation. The results are as follows. The implementation of the  "friend-shoring"  policy will lead to a decline in consumer welfare across all countries. The main causes of these economic costs include changes in  the  volume  of trade,  terms  of  trade  effects,  and  factor  allocation  effects.  Within  China,  the  regions  most  affected are  Guangdong,  Shanghai,  and  Jiangsu, which  have  strong  ties  to  international  markets. The  most  affected  industries are  electronic  and  electrical  equipment  manufacturing,  metal  smelting  and  products,  and  the  petrochemical  industry, due  to  their  heavy  reliance  on  foreign  imports  for  production  inputs.  Among  the  IPEF  member  countries,  New  Zea ⁃ land, Malaysia, and South Korea are the most adversely affected, as they engage in significant trade with China. Addi ⁃ tionally, our counterfactual simulations indicate that domestic circulation has a more substantial mitigating effects on the  economic  costs  of  "friend-shoring"  than  international  circulation.  Within  domestic  circulation,  the  integration  of factor markets, such as labor and capital, plays a more significant role than the integration of goods markets. Simulta ⁃ neously promoting both domestic and international circulation yields even more positive effects. Based on these find ⁃ ings,  this  paper  offers  policy  recommendations  for  China  to  effectively  respond  to  external  risks  and  challenges,  en ⁃ hance China's resilience and ensure the continuity of supply chain operations in the face of evolving global economic dynamics, thereby contributing to the stability and security of global supply chains.

The  contributions  of this  paper  are  threefold.  First,  it  is  the  first  to  explore  the  impact  of  "friend-shoring"  on consumer welfare across different countries and regions within China in a multi-country, multi-region framework, pro ⁃ viding theoretical insights into the external risks faced by China. Second, in examining the economic costs of "friend- shoring," this paper enhances the comprehensiveness and accuracy of economic cost estimates by incorporating non- tariff barriers  into  the  model,  unlike  existing  literature  which  typically  depicts  "friend-shoring"  in  a  more  singular manner. Third, from a theoretical perspective, this paper uses a model that includes input-output linkages, labor mi ⁃ gration, and cross-regional capital allocation to identify the main mechanisms through which  "friend-shoring"  affects consumer welfare, namely term of trade effects, volume of trade effects, and factor allocation effects. It also provides a counterfactual analysis of the extent to which the economic costs of "friend-shoring" are hedged from domestic, in ⁃ ternational, and dual circulation perspectives, offering micro-theoretical foundations for policy choices.

Key words: friend-shoring; dual circulation; market integration; general equilibrium model

JEL Classification: F14, D57, F17

China Economic Quarterly

The Robot Revolution Reduces Offshoring: A Theoretical and Empirical Analysis

ZENG Rong, YAN Xiaochang and CHEN Yi

Abstract: The robotrevolution has led to the substitution ofmachinesforhumans, making laborless important, which mayhavea profound impacton theglobaldivision oflaborand exchangepatterns deter- mined bylaborcosts. Based on theaboveconsiderations, weexaminetheimpactoftherobotrevolution on offshoring from both theoreticaland empiricalperspectives. We constructa two-sectoropen country model thatincludes automation and outsourcing, and find thatgiven other factors unchanged, the robot revolu- tion willreducetheoffshoringin allsectors. What s more, thehigherthelabourdensity, themoretheoff- shoring decreases.

Key words: robotrevolution; offshoring; reshoring

JEL Classification: F14, O14, O33

China Economic Quarterly

Profit Shifting of FDI in China—From the Perspective of Corporate Control Rights

WANG Xuan, LIU Zhencen and LILixing

Abstract: The cross-border profits shifting by FDI(foreign direct investment)  has led to a loss of China stax base. The existing research has mainly focused on OFDI(outward foreign directinvestment) ,  paying insufficientattention to FDI. Matching the 2002—2007AnnualSurvey of IndustrialFirms Dataset withFDIInformation, wefind thatforeign invested firms does shiftprofitoutin orderto avoid tax: a one percentagepointincreasein theincometax ratedifferencebetween Chinaand homecountry corresponds to 1. 1% higher profitshifting. We furtheranalyze the impactofcontrolrights offoreign ownership and con- firms its important role. This study enhances our understanding of international tax avoidance from the perspective ofcorporate controlrights.

Key words: FDI; profitshifting; controlright

JEL Classification: F23, H25, H32

The Journal of World Economy

Supply Chain Networks, Market Environments and Chinese Enterprises“Going Global in Groups ”

Luo Changyuan; Chen Zhitao; Li Zheng

Abstract: This paper investigates the economic phenomenon of Chinese firms entering developing countries in a globalised manner as a group. Drawing on the literature on firm heterogeneity and supply chain networks, it proposes a theoretical model to explore the relationship between group globalisation and host country market environments, and empirically tests research hypotheses using firm-level data. The  baseline  estimate  and  robustness  checks  reveal  that  investment  in  supply  chain  networks  can eventually  drive  firms  to  make   direct  investments   in  the   same   country,  and  this  effect  is  more pronounced in host countries with weaker market environments, indicating that the group globalisation approach  can  help  firms  overcome  market  incompleteness  in  the  host  country.  After  a   series  of robustness tests, such as the instrumental variables estimation, the above results remain solid. Analysis of the transmission mechanism suggests that supply chain network investment can help firms overcome market incompleteness in the host country through information transmission and production and sales support. In addition, the analysis of firm heterogeneity shows that group globalisation is more useful for small, young and less capital-intensive firms to overcome the incompleteness of the host country market. These findings enrich the understanding of the phenomenon of firms globalising in groups and provide policy implications for strengthening national supply chain networks with a view to better promoting the globalisation of firms in a healthy and orderly manner.

Key words:  supply chain networks,  market incompleteness, outward foreign direct investment (OFDI)

JEL codes: D85, F21, F55