Dissertation > Economic > Industrial economy > China Industrial Economy > Industrial construction and development

Global Value Chain Theory and China’s Manufacturing Industry Upgrading Strategy

Author YangHua
Tutor LiuShuGuang
School Ocean University of China
Course International trade
Keywords global value chain manufacturing industry industry upgrading China
CLC F424
Type Master's thesis
Year 2005
Downloads 1419
Quotes 12
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With the outside environment changing drastically, especially the competition becoming more and more fierce, MNCs realize that they could not cope with the competition successfully depending on their own power. Consequently they are changing their development strategies. Now they begin outsourcing manufacturing and assembly activities, reserving the most competitive activities such as R&D, marketing and after-sale services. So the division relationship between developed countries and developing countries is changing from vertical division to mixed division, namely different companies are in charge of different tasks in the industry chain. Under this situation, the relationship between different companies is unfair. The companies of developing countries need changing their status by industry upgrading.Global value chain theory can explain the current division relationship precisely. By researching the relationship between different nodes in the industry chain, global value chain theory can explain how the industry chain is governing and how the profit is divided between companies. According to this, different companies can make their own development strategies reasonably. Using global value chain theory, developing countries can find out the opportunities and challenges they are facing now, and find the way to upgrade their competency.Just like the other developing countries, China isn’t in good condition in the competition with MNCs and facing the problem of industry upgrading .Our country’s manufacturing industry is still underdeveloped, mainly engaging in processing and assembly. The profit earned by our country’s companies is slender. On the contrary, MNCs are gaining tens times profit comparing with our country’s companies. If this situation continuing, the gap between our country and the developed countries with be enlarged. So actions should be taken to change the trend. On the same time, becoming the world-manufacturing center is a dream of the whole country. Fortunately we are now facing unprecedented opportunity. MNCs are transferring their production plants to China in large groups. This trend makes the dream more realistic.In order to become the world’s manufacturing center, our country’s manufacturing industry should experience three phases. Firstly, processing and assembly industries should be developed more competitively, which can make a good preparation for the next step. Secondly, our country’s manufacturing industry should upgrade along the global value chain, extending from processing and assembly to R&D and brands. In this phase, big companies known by the whole world will appear in our country. Finally, our country becomes the world’s manufacturing center, and the companies will become very strong and competitive, dominating the global value chain.

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