Productivity, profitability, production and export structures along the value chain in China

This paper incorporates Chinese input-output tables, firm-level manufacturing data and transaction-level customs data into a unified value chain framework, which allows us to study the value chain position for all industries, regions, and firms in China. We then apply this framework to analyze firms' production and export performances along the value chain and document the following patterns: (1). Both start-up capital stock and the annual investment expenses are higher for upstream firms, which makes the upstream firms more capital intensive. (2). Both productivity and profitability are higher for these upstream firms. (3). Counter-intuitively, the underdeveloped provinces, which are often thought to be more labor-abundant, are concentrated in the capital-intensive upstream industries. We suggest that the “Third Front Construction” policy implemented between 1964 and 1980 in China could play some role for this counter-intuitive finding. (4). Both production and export upstreamness have increased after year 2002.