APS-008: East Asian Value Chains and the Global Financial Crisis
Measuring the scale and impact of global value chains (GVCs) is extremely difficult. We know, for example, that a large part of the electronic components that China imports from is Asian neighbours are intermediate inputs that are simply assembled in China before being exported to Western consumers. But, we don’t have a good sense of what proportion of these imports end up in products destined for export and what proportion are consumed in China’s fast-growing domestic market. The large swings in Chinese trade during the global financial crisis offers us a unique pportunity to gain a better understanding of these relationships.
During the global financial crisis, Chinese electronic exports to Canada and the U.S. fell off dramatically, declining by more than 50% between July 2008 and January 2009. Interestingly, Chinese electronics imports from its Asian neighbours fell off by just a little bit more at 60% and began to recover one month earlier. Furthermore, as the recovery began to take hold both the timing and scale of the rebound in Chinese exports of electronics to Canada and the U.S. and in Chinese imports of these products from its Asian neighbours were remarkably similar. This seems to support the belief that in this sector global value chains play an extremely important role with a large share of Chinese imports coming from the immediate region which are then assembled and sent on to markets in the West. A more rigorous evaluation of the data confirms that value chains play an extremely important role in the electronics sector in China with a high degree of Chinese imports in that sector directly tied to exports to other markets and with no lags, even in the monthly data. GVCs play a less important role in other, for example in Machinery a smaller portion of Chinese imports appear to be linked directly to exports and the lags are greater.
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