- China’s overall participation rate in global value chain has significantly increased from 29.5% in 1990 to 44.6% in 2018, according to Sinolytics’ calculation based on the UNCTAD Eora GVC database.
- The detailed look at imports and exports of immediate goods tells two distinct stories:
- China is consistently enhancing its value add in exports of immediate goods, which is thereafter exported to third countries.
- In contrast, its reliance on imports of foreign immediate goods peaked around 2008 and then reduced gradually.
- One explanation for the reduction of import reliance is the growing maturity of China’s industrial sectors: Now stretching across vertical value chains, China’s industries have steadily decreased the demand for imported foreign parts or raw materials.
- This evolution also matches closely with the intentions of China’s top leadership for China’s position in international trade. Xi expressed prominently in 2020: “(we) shall improve the reliance of global value chain over China and provide strong capacity of deterrence and countermeasures towards potential cutoff of foreign supply”
- This also clarifies a common misunderstanding regarding the “dual circulation” concept: The goal of “dual circulation” is not to shrink the size of international trade, not to reduce the level of Chinese integration, but to make it more favorable towards China.
- China intends to exert more influence over the global supply chain by providing more value add in its export while reducing the risks of “foreign influence” over its imports.
Sinolytics is a European research-based consultancy entirely focused on China. It advises European companies on their strategic orientation and concrete business activities in China.