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Domestic Value Added in Chinese Exports
Hiau Looi Kee and Heiwai Tang
World Bank and Tufts University
December 2011
The �ndings and results of this paper do not represent the views of theWorld Bank, its Executive Directors, or the countries they represent
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 1 / 32
Designed by Apple in California, Assembled in China
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 2 / 32
US-China Trade, 1995 and 2010
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 3 / 32
Introduction
The widening bilateral imbalance in US-China trade has attracted alot of heated discussions, mainly focus on the US labor market impactof Chinese exports
Autor, Dorn and Hanson (2011) �nd that Chinese imports into the USsigni�cantly lower job creation, wages, and labor market participation
Scott (2011): �growing US trade de�cit with China costs 2.8 millionjobs between 2001 and 2010.�
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 4 / 32
Introduction
The widening bilateral imbalance in US-China trade has attracted alot of heated discussions, mainly focus on the US labor market impactof Chinese exports
Autor, Dorn and Hanson (2011) �nd that Chinese imports into the USsigni�cantly lower job creation, wages, and labor market participation
Scott (2011): �growing US trade de�cit with China costs 2.8 millionjobs between 2001 and 2010.�
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 4 / 32
Introduction
The widening bilateral imbalance in US-China trade has attracted alot of heated discussions, mainly focus on the US labor market impactof Chinese exports
Autor, Dorn and Hanson (2011) �nd that Chinese imports into the USsigni�cantly lower job creation, wages, and labor market participation
Scott (2011): �growing US trade de�cit with China costs 2.8 millionjobs between 2001 and 2010.�
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 4 / 32
Factory of the World
China being the �factory of the World,�due to its participation in theglobal production chain, particularly at the �nal assembly stage
While many products are �made in China�, they embody inputs fromaround the world
For Apple�s iPod, only US$4 out of its value of US$150 can beattributable to producers located in China, with the rest being createdmostly in the US, Japan, and Korea (Dedrick, Kraemer and Linden,2009)
Majority of Chinese exports are under the processing trade regime,whereby �rms in China import materials or parts to be furtherassembled, processed and exported
Domestic value added in Chinese exports may be far less than actualgross exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 5 / 32
Factory of the World
China being the �factory of the World,�due to its participation in theglobal production chain, particularly at the �nal assembly stage
While many products are �made in China�, they embody inputs fromaround the world
For Apple�s iPod, only US$4 out of its value of US$150 can beattributable to producers located in China, with the rest being createdmostly in the US, Japan, and Korea (Dedrick, Kraemer and Linden,2009)
Majority of Chinese exports are under the processing trade regime,whereby �rms in China import materials or parts to be furtherassembled, processed and exported
Domestic value added in Chinese exports may be far less than actualgross exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 5 / 32
Factory of the World
China being the �factory of the World,�due to its participation in theglobal production chain, particularly at the �nal assembly stage
While many products are �made in China�, they embody inputs fromaround the world
For Apple�s iPod, only US$4 out of its value of US$150 can beattributable to producers located in China, with the rest being createdmostly in the US, Japan, and Korea (Dedrick, Kraemer and Linden,2009)
Majority of Chinese exports are under the processing trade regime,whereby �rms in China import materials or parts to be furtherassembled, processed and exported
Domestic value added in Chinese exports may be far less than actualgross exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 5 / 32
Factory of the World
China being the �factory of the World,�due to its participation in theglobal production chain, particularly at the �nal assembly stage
While many products are �made in China�, they embody inputs fromaround the world
For Apple�s iPod, only US$4 out of its value of US$150 can beattributable to producers located in China, with the rest being createdmostly in the US, Japan, and Korea (Dedrick, Kraemer and Linden,2009)
Majority of Chinese exports are under the processing trade regime,whereby �rms in China import materials or parts to be furtherassembled, processed and exported
Domestic value added in Chinese exports may be far less than actualgross exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 5 / 32
Factory of the World
China being the �factory of the World,�due to its participation in theglobal production chain, particularly at the �nal assembly stage
While many products are �made in China�, they embody inputs fromaround the world
For Apple�s iPod, only US$4 out of its value of US$150 can beattributable to producers located in China, with the rest being createdmostly in the US, Japan, and Korea (Dedrick, Kraemer and Linden,2009)
Majority of Chinese exports are under the processing trade regime,whereby �rms in China import materials or parts to be furtherassembled, processed and exported
Domestic value added in Chinese exports may be far less than actualgross exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 5 / 32
0.553 0.5520.553
0.552
0.554
0.548
0.527
020
040
060
080
010
00Bi
llion
USD
2000 2002 2004 2006year
Total Processing Exports Processing ShareRegular Exports Total Exports
China's Aggregate Exports by Type
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 6 / 32
What this paper is all about?
This paper provides evidence on the trend and the pattern of thedomestic value added in Chinese exports
Existing research includes Chen, Chang, Fung and Lau (2001),Hummels, Ishii and Yi (2001), Koopman, Wang and Wei (2008), andKoopman, Powers, Wang and Wei (2010), Johnson and Noguera(forthcoming)
These studies mainly rely on input-output tables at the sector level toassess foreign content in Chinese exports
This paper takes a ground-up approach: we use transaction-leveltrade data and �rm-level production data to assess the domestic valueadded in Chinese exports from 2000 to 2006
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 7 / 32
What this paper is all about?
This paper provides evidence on the trend and the pattern of thedomestic value added in Chinese exports
Existing research includes Chen, Chang, Fung and Lau (2001),Hummels, Ishii and Yi (2001), Koopman, Wang and Wei (2008), andKoopman, Powers, Wang and Wei (2010), Johnson and Noguera(forthcoming)
These studies mainly rely on input-output tables at the sector level toassess foreign content in Chinese exports
This paper takes a ground-up approach: we use transaction-leveltrade data and �rm-level production data to assess the domestic valueadded in Chinese exports from 2000 to 2006
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 7 / 32
What this paper is all about?
This paper provides evidence on the trend and the pattern of thedomestic value added in Chinese exports
Existing research includes Chen, Chang, Fung and Lau (2001),Hummels, Ishii and Yi (2001), Koopman, Wang and Wei (2008), andKoopman, Powers, Wang and Wei (2010), Johnson and Noguera(forthcoming)
These studies mainly rely on input-output tables at the sector level toassess foreign content in Chinese exports
This paper takes a ground-up approach: we use transaction-leveltrade data and �rm-level production data to assess the domestic valueadded in Chinese exports from 2000 to 2006
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 7 / 32
What this paper is all about?
This paper provides evidence on the trend and the pattern of thedomestic value added in Chinese exports
Existing research includes Chen, Chang, Fung and Lau (2001),Hummels, Ishii and Yi (2001), Koopman, Wang and Wei (2008), andKoopman, Powers, Wang and Wei (2010), Johnson and Noguera(forthcoming)
These studies mainly rely on input-output tables at the sector level toassess foreign content in Chinese exports
This paper takes a ground-up approach: we use transaction-leveltrade data and �rm-level production data to assess the domestic valueadded in Chinese exports from 2000 to 2006
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 7 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS
3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
How is it done?
1 Identify a set of �rms that only participated in processing exports in asingle HS 2-digit industry: all imports are used to produce processingexports within the industry
2 Merge these �rms to their production data from China�s NBS3 Compare import to export ratio of customs data to material to salesratio of production data ) weed out �rms that specialized inimporting or exporting
4 Use the clean sample to compute a �rm�s domestic value added ratio(DVAR) of the year, which simply equals the ratio of net exports togross exports at the �rm level
5 Aggregate up all the �rms in our clean sample to the HS 2 industriesthey are operating to calculate the industry DVAR based on the �rmsexports and imports data
6 Use export weighted average of the industry DVARs to �gure out thedomestic value added of �rms operating across multiple industries
7 Aggregate up all �rms to calculate domestic value added by exportdestinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 8 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Results
Domestic value added in Chinese processing exports was around 50percent in 2000, and it gradually increases to 62 percent in 2006
Such increase is wide spread across HS-2 industries as well as acrossdestination countries
Firm level regressions con�rm that export processing �rms substituteimported materials with domestic materials which explains the risingDVAR
Rising DVAR is not driven by rising domestic production costs
This result suggests that China may be moving up the globalproduction chain and is no longer only responsible for the �nal stageof productions
However, foreign content remains high in Chinese exports ) policyanalysis based on gross trade �ows will grossly overestimate theimpact of Chinese exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 9 / 32
Road Map Ahead
Data
Methodology1 Multiproduct �rms2 Negative domestic value added
Results
Conclusions
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 10 / 32
Data
The main data set covers the universe of Chinese import and exporttransactions in each month between 2000 and 2006
It reports values (in US dollars) of imports and exports at the HS8-digit level (over 7000 products) from a �rm to/from each country(over 200 destination and source countries)
We also use �rm-level data from the annual surveys of industrial �rmsconducted by China�s National Bureau of Statistics (NBS) for the1998-2007 period
The surveys cover all state-owned �rms and all non-state-owned �rmswith sales above 5 million yuan
The data set contains detailed information for about 100 variables,including �rm ID, address, ownership, output, value added, four-digitindustry code (480 categories), six-digit geographic code, exports,employment, original value of �xed asset, and intermediate inputs
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 11 / 32
Data
The main data set covers the universe of Chinese import and exporttransactions in each month between 2000 and 2006
It reports values (in US dollars) of imports and exports at the HS8-digit level (over 7000 products) from a �rm to/from each country(over 200 destination and source countries)
We also use �rm-level data from the annual surveys of industrial �rmsconducted by China�s National Bureau of Statistics (NBS) for the1998-2007 period
The surveys cover all state-owned �rms and all non-state-owned �rmswith sales above 5 million yuan
The data set contains detailed information for about 100 variables,including �rm ID, address, ownership, output, value added, four-digitindustry code (480 categories), six-digit geographic code, exports,employment, original value of �xed asset, and intermediate inputs
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 11 / 32
Data
The main data set covers the universe of Chinese import and exporttransactions in each month between 2000 and 2006
It reports values (in US dollars) of imports and exports at the HS8-digit level (over 7000 products) from a �rm to/from each country(over 200 destination and source countries)
We also use �rm-level data from the annual surveys of industrial �rmsconducted by China�s National Bureau of Statistics (NBS) for the1998-2007 period
The surveys cover all state-owned �rms and all non-state-owned �rmswith sales above 5 million yuan
The data set contains detailed information for about 100 variables,including �rm ID, address, ownership, output, value added, four-digitindustry code (480 categories), six-digit geographic code, exports,employment, original value of �xed asset, and intermediate inputs
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 11 / 32
Data
The main data set covers the universe of Chinese import and exporttransactions in each month between 2000 and 2006
It reports values (in US dollars) of imports and exports at the HS8-digit level (over 7000 products) from a �rm to/from each country(over 200 destination and source countries)
We also use �rm-level data from the annual surveys of industrial �rmsconducted by China�s National Bureau of Statistics (NBS) for the1998-2007 period
The surveys cover all state-owned �rms and all non-state-owned �rmswith sales above 5 million yuan
The data set contains detailed information for about 100 variables,including �rm ID, address, ownership, output, value added, four-digitindustry code (480 categories), six-digit geographic code, exports,employment, original value of �xed asset, and intermediate inputs
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 11 / 32
Data
The main data set covers the universe of Chinese import and exporttransactions in each month between 2000 and 2006
It reports values (in US dollars) of imports and exports at the HS8-digit level (over 7000 products) from a �rm to/from each country(over 200 destination and source countries)
We also use �rm-level data from the annual surveys of industrial �rmsconducted by China�s National Bureau of Statistics (NBS) for the1998-2007 period
The surveys cover all state-owned �rms and all non-state-owned �rmswith sales above 5 million yuan
The data set contains detailed information for about 100 variables,including �rm ID, address, ownership, output, value added, four-digitindustry code (480 categories), six-digit geographic code, exports,employment, original value of �xed asset, and intermediate inputs
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 11 / 32
Figure 1: Chinese exports by type, 2000-2006
0.553 0.5520.553
0.552
0.554
0.548
0.527
020
040
060
080
010
00Bi
llion
USD
2000 2002 2004 2006year
Total Processing Exports Processing ShareRegular Exports Total Exports
China's Aggregate Exports by Type
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 12 / 32
Table 1: Top 10 Destinations for Chinese ProcessingExports
2000 2003 2006
Rank Share $ (Bil) Share $ (Bil) Share $ (Bil)
1 United States 0.25 25 United States 0.25 50.1 United States 0.25 113
2 Hong Kong 0.22 22.2 Hong Kong 0.23 44.6 Hong Kong 0.23 105
3 Japan 0.18 18.2 Japan 0.15 30.1 Japan 0.1 47.1
4 Korea 0.04 4.17 Germany 0.04 8.65 Germany 0.05 21.3
5 Germany 0.04 3.8 Netherlands 0.04 7.85 Netherlands 0.04 18.9
6 Singapore 0.03 3.17 Korea 0.04 7.81 Korea 0.04 18.2
7 Netherlands 0.03 3.07 Singapore 0.02 4.92 Singapore 0.03 12.8
8 UK 0.03 2.77 UK 0.02 4.81 UK 0.02 11.1
9 Taiwan 0.02 2.06 Taiwan 0.02 4.45 Taiwan 0.02 9.89
10 France 0.02 1.59 France 0.02 3.94 Malaysia 0.02 7.17
Total 101 198 449
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 13 / 32
Figure 2: Share of processing exports in top 10 destinations
0.2
.4.6
.8
US HK JP KR DE NL GB SG TW IT
Share of Processing Exports by Top 10 Destinations
2000 2006
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 14 / 32
Figure 3: Shares of processing exports in HS 2 industries
0.2
.4.6
.81
0.2
.4.6
.81
0.2
.4.6
.81
0.2
.4.6
.81
2 3 4 5 6 7 8 9 101112131415 16 17 18 19 20 21 22 23 24 25 26 27
2829303132333435363738 39 40 41 42 43 44 45 46 47 48 49
5051525354555657585960616263 64 65 66 67 68 69 70 71 7273747576787980818283
84 85 86 87 88 89 90 91 92 93 94 95 96 97
0105: Animal & Animal Products 0615: Vegetable Products 1624: Foodstuffs 2527: Mineral Products
2838: Chemicals & Allied Industries 3940: Plastics/ Rubbers4143: Raw Hides, Skins, Leather, Furs4449: Wood & Wood Products
5063: Textiles 6467: Footwear / Headgear 6871: Stone / Glass 7283: Metals
8485: Machinery / Electrical 8689: Transportation 9097: Miscellaneous
Graphs by group_desc
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 15 / 32
In Summary
Processing trade is wide spread across industries and exportdestinations
For many destinations, such as the US, processing trade is the mainform of exports from China
For many industries, such as Electronics, Transportation, PlasticProducts, Toys, processing trade is the main form of exports fromChina
Given the high imported content in processing exports, any analysisbased on gross trade �ows can be highly misleading
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 16 / 32
In Summary
Processing trade is wide spread across industries and exportdestinations
For many destinations, such as the US, processing trade is the mainform of exports from China
For many industries, such as Electronics, Transportation, PlasticProducts, Toys, processing trade is the main form of exports fromChina
Given the high imported content in processing exports, any analysisbased on gross trade �ows can be highly misleading
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 16 / 32
In Summary
Processing trade is wide spread across industries and exportdestinations
For many destinations, such as the US, processing trade is the mainform of exports from China
For many industries, such as Electronics, Transportation, PlasticProducts, Toys, processing trade is the main form of exports fromChina
Given the high imported content in processing exports, any analysisbased on gross trade �ows can be highly misleading
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 16 / 32
In Summary
Processing trade is wide spread across industries and exportdestinations
For many destinations, such as the US, processing trade is the mainform of exports from China
For many industries, such as Electronics, Transportation, PlasticProducts, Toys, processing trade is the main form of exports fromChina
Given the high imported content in processing exports, any analysisbased on gross trade �ows can be highly misleading
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 16 / 32
Methodology
Start with a textbook identity, where the total revenue of a �rm(PY ) , consists of the following components: pro�ts, (π) , wages(wL) , cost of capital (rK ) , cost of domestic material
�PDMD
�and
cost of imported material�P IM I
�PY = π + wL+ rK + PDMD + P IM I
In theory, for processing trade �rms,
PY = EXP
P IM I = IMP
Hence domestic value added (DVA) for processing trade �rms is
EXP � IMP = π + wL+ rK + PDMD = DVA
Domestic value added ratio (DVAR) is therefore
DVAR =DVAEXP
=EXP � IMP
EXP= 1� IMP
EXP
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 17 / 32
Methodology
Start with a textbook identity, where the total revenue of a �rm(PY ) , consists of the following components: pro�ts, (π) , wages(wL) , cost of capital (rK ) , cost of domestic material
�PDMD
�and
cost of imported material�P IM I
�PY = π + wL+ rK + PDMD + P IM I
In theory, for processing trade �rms,
PY = EXP
P IM I = IMP
Hence domestic value added (DVA) for processing trade �rms is
EXP � IMP = π + wL+ rK + PDMD = DVA
Domestic value added ratio (DVAR) is therefore
DVAR =DVAEXP
=EXP � IMP
EXP= 1� IMP
EXP
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 17 / 32
Methodology
Start with a textbook identity, where the total revenue of a �rm(PY ) , consists of the following components: pro�ts, (π) , wages(wL) , cost of capital (rK ) , cost of domestic material
�PDMD
�and
cost of imported material�P IM I
�PY = π + wL+ rK + PDMD + P IM I
In theory, for processing trade �rms,
PY = EXP
P IM I = IMP
Hence domestic value added (DVA) for processing trade �rms is
EXP � IMP = π + wL+ rK + PDMD = DVA
Domestic value added ratio (DVAR) is therefore
DVAR =DVAEXP
=EXP � IMP
EXP= 1� IMP
EXP
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 17 / 32
Methodology
Start with a textbook identity, where the total revenue of a �rm(PY ) , consists of the following components: pro�ts, (π) , wages(wL) , cost of capital (rK ) , cost of domestic material
�PDMD
�and
cost of imported material�P IM I
�PY = π + wL+ rK + PDMD + P IM I
In theory, for processing trade �rms,
PY = EXP
P IM I = IMP
Hence domestic value added (DVA) for processing trade �rms is
EXP � IMP = π + wL+ rK + PDMD = DVA
Domestic value added ratio (DVAR) is therefore
DVAR =DVAEXP
=EXP � IMP
EXP= 1� IMP
EXP
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 17 / 32
Two Important Assumptions
1 we assume that there is no imported content in domestic materials,such that PDMD embodies purely domestic contents
2 we assume that imported materials have no Chinese contents, suchthat IMP is completely foreign made
If violated, the �rst assumption will lead to an over-estimation of DVA
If violated, the second assumption will lead to an under-estimation ofDVA
The overall bias due to the two assumptions is not clear, but there isnothing we can do at this stage to assess the direction of bias.
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 18 / 32
Two Important Assumptions
1 we assume that there is no imported content in domestic materials,such that PDMD embodies purely domestic contents
2 we assume that imported materials have no Chinese contents, suchthat IMP is completely foreign made
If violated, the �rst assumption will lead to an over-estimation of DVA
If violated, the second assumption will lead to an under-estimation ofDVA
The overall bias due to the two assumptions is not clear, but there isnothing we can do at this stage to assess the direction of bias.
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 18 / 32
Two Important Assumptions
1 we assume that there is no imported content in domestic materials,such that PDMD embodies purely domestic contents
2 we assume that imported materials have no Chinese contents, suchthat IMP is completely foreign made
If violated, the �rst assumption will lead to an over-estimation of DVA
If violated, the second assumption will lead to an under-estimation ofDVA
The overall bias due to the two assumptions is not clear, but there isnothing we can do at this stage to assess the direction of bias.
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 18 / 32
Two Important Assumptions
1 we assume that there is no imported content in domestic materials,such that PDMD embodies purely domestic contents
2 we assume that imported materials have no Chinese contents, suchthat IMP is completely foreign made
If violated, the �rst assumption will lead to an over-estimation of DVA
If violated, the second assumption will lead to an under-estimation ofDVA
The overall bias due to the two assumptions is not clear, but there isnothing we can do at this stage to assess the direction of bias.
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 18 / 32
Two Important Assumptions
1 we assume that there is no imported content in domestic materials,such that PDMD embodies purely domestic contents
2 we assume that imported materials have no Chinese contents, suchthat IMP is completely foreign made
If violated, the �rst assumption will lead to an over-estimation of DVA
If violated, the second assumption will lead to an under-estimation ofDVA
The overall bias due to the two assumptions is not clear, but there isnothing we can do at this stage to assess the direction of bias.
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 18 / 32
Multiproduct �rms
Above framework is helpful to �gure out DVAR at �rm level, but notuseful for product level or industry level analysis
Majority of �rms produce multiple products ) not be possible toassign the imported materials to each of the HS 6 digit products a�rm exports without knowing its �rm level production structure
Focus on the subset of export processing �rms that only operatewithin a single HS 2 industry
Example of HS 2 industries: Woven apparel products (HS 62),Non-woven apparel product (HS 61), Footwear, gaiters and the like(HS 64), Electrical machinery and equipment and parts (HS 85),Toys, games and sports requisites (HS 95)
For these set of single HS 2 industry processing �rms, all its importsare for exports within their HS 2 industry ) estimate the averageDVA for each HS 2 industry using the sample of single-HS2 exporters
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 19 / 32
Multiproduct �rms
Above framework is helpful to �gure out DVAR at �rm level, but notuseful for product level or industry level analysis
Majority of �rms produce multiple products ) not be possible toassign the imported materials to each of the HS 6 digit products a�rm exports without knowing its �rm level production structure
Focus on the subset of export processing �rms that only operatewithin a single HS 2 industry
Example of HS 2 industries: Woven apparel products (HS 62),Non-woven apparel product (HS 61), Footwear, gaiters and the like(HS 64), Electrical machinery and equipment and parts (HS 85),Toys, games and sports requisites (HS 95)
For these set of single HS 2 industry processing �rms, all its importsare for exports within their HS 2 industry ) estimate the averageDVA for each HS 2 industry using the sample of single-HS2 exporters
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 19 / 32
Multiproduct �rms
Above framework is helpful to �gure out DVAR at �rm level, but notuseful for product level or industry level analysis
Majority of �rms produce multiple products ) not be possible toassign the imported materials to each of the HS 6 digit products a�rm exports without knowing its �rm level production structure
Focus on the subset of export processing �rms that only operatewithin a single HS 2 industry
Example of HS 2 industries: Woven apparel products (HS 62),Non-woven apparel product (HS 61), Footwear, gaiters and the like(HS 64), Electrical machinery and equipment and parts (HS 85),Toys, games and sports requisites (HS 95)
For these set of single HS 2 industry processing �rms, all its importsare for exports within their HS 2 industry ) estimate the averageDVA for each HS 2 industry using the sample of single-HS2 exporters
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 19 / 32
Multiproduct �rms
Above framework is helpful to �gure out DVAR at �rm level, but notuseful for product level or industry level analysis
Majority of �rms produce multiple products ) not be possible toassign the imported materials to each of the HS 6 digit products a�rm exports without knowing its �rm level production structure
Focus on the subset of export processing �rms that only operatewithin a single HS 2 industry
Example of HS 2 industries: Woven apparel products (HS 62),Non-woven apparel product (HS 61), Footwear, gaiters and the like(HS 64), Electrical machinery and equipment and parts (HS 85),Toys, games and sports requisites (HS 95)
For these set of single HS 2 industry processing �rms, all its importsare for exports within their HS 2 industry ) estimate the averageDVA for each HS 2 industry using the sample of single-HS2 exporters
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 19 / 32
Multiproduct �rms
Above framework is helpful to �gure out DVAR at �rm level, but notuseful for product level or industry level analysis
Majority of �rms produce multiple products ) not be possible toassign the imported materials to each of the HS 6 digit products a�rm exports without knowing its �rm level production structure
Focus on the subset of export processing �rms that only operatewithin a single HS 2 industry
Example of HS 2 industries: Woven apparel products (HS 62),Non-woven apparel product (HS 61), Footwear, gaiters and the like(HS 64), Electrical machinery and equipment and parts (HS 85),Toys, games and sports requisites (HS 95)
For these set of single HS 2 industry processing �rms, all its importsare for exports within their HS 2 industry ) estimate the averageDVA for each HS 2 industry using the sample of single-HS2 exporters
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 19 / 32
Negative Domestic Value Added
About 10% of single-industry �rms have negative DVA, which is whenimports >> exports
Two problems that may cause processing imports to be greater thanprocessing exports within a �rm in a given year
1 Leakage issues2 Inventory management
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 20 / 32
Negative Domestic Value Added
About 10% of single-industry �rms have negative DVA, which is whenimports >> exports
Two problems that may cause processing imports to be greater thanprocessing exports within a �rm in a given year
1 Leakage issues2 Inventory management
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 20 / 32
Negative Domestic Value Added
About 10% of single-industry �rms have negative DVA, which is whenimports >> exports
Two problems that may cause processing imports to be greater thanprocessing exports within a �rm in a given year
1 Leakage issues
2 Inventory management
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 20 / 32
Negative Domestic Value Added
About 10% of single-industry �rms have negative DVA, which is whenimports >> exports
Two problems that may cause processing imports to be greater thanprocessing exports within a �rm in a given year
1 Leakage issues2 Inventory management
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 20 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rms
Hence, processing imports can be larger than processing exports at�rm level ) DVA < 0Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rmsDrop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry levelFor those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rmsHence, processing imports can be larger than processing exports at�rm level ) DVA < 0
Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rmsDrop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry levelFor those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rmsHence, processing imports can be larger than processing exports at�rm level ) DVA < 0Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rms
Drop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry levelFor those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rmsHence, processing imports can be larger than processing exports at�rm level ) DVA < 0Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rmsDrop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry levelFor those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rmsHence, processing imports can be larger than processing exports at�rm level ) DVA < 0Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rmsDrop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry level
For those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Leakage Issues
Some single-industry export processing �rms, while exporting, mayimport materials for other �rmsHence, processing imports can be larger than processing exports at�rm level ) DVA < 0Merging the single-industry export processing �rms to theirproduction data collected by the census of manufacturing �rmsDrop �rms where there is excessive imports:
materialsrevenue
<IMPEXP
For the remaining �rms, we obtain the share of DVA in exports of theindustries they operate in by summing up the imports and exports atHS 2 industry levelFor those �rms that operate across multiple HS 2 industries, we applythe export weighted average DVA ratio of the industries they are in toobtain their �rm level DVA ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 21 / 32
Inventory Management
Current year processing imports may not be used fully for currentlyyear processing exports, which causes DVA < 0
For those industries that use a lot of commodities based materialssuch as iron, copper and crude oil, �rms have incentive to stock upimported materials when the international prices of such commoditiesare low in order to hedge again rising prices in the future
No easy solutions
But this may not be a big problem, as once we weed out �rms withexcessive imports, DVA are mostly positive
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 22 / 32
Inventory Management
Current year processing imports may not be used fully for currentlyyear processing exports, which causes DVA < 0
For those industries that use a lot of commodities based materialssuch as iron, copper and crude oil, �rms have incentive to stock upimported materials when the international prices of such commoditiesare low in order to hedge again rising prices in the future
No easy solutions
But this may not be a big problem, as once we weed out �rms withexcessive imports, DVA are mostly positive
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 22 / 32
Inventory Management
Current year processing imports may not be used fully for currentlyyear processing exports, which causes DVA < 0
For those industries that use a lot of commodities based materialssuch as iron, copper and crude oil, �rms have incentive to stock upimported materials when the international prices of such commoditiesare low in order to hedge again rising prices in the future
No easy solutions
But this may not be a big problem, as once we weed out �rms withexcessive imports, DVA are mostly positive
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 22 / 32
Inventory Management
Current year processing imports may not be used fully for currentlyyear processing exports, which causes DVA < 0
For those industries that use a lot of commodities based materialssuch as iron, copper and crude oil, �rms have incentive to stock upimported materials when the international prices of such commoditiesare low in order to hedge again rising prices in the future
No easy solutions
But this may not be a big problem, as once we weed out �rms withexcessive imports, DVA are mostly positive
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 22 / 32
Results
Domestic value added share in total processing export was 50% in2000
It has since risen to 62% in 2006
Rising DVAR is observed across industries and across destinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 23 / 32
Results
Domestic value added share in total processing export was 50% in2000
It has since risen to 62% in 2006
Rising DVAR is observed across industries and across destinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 23 / 32
Results
Domestic value added share in total processing export was 50% in2000
It has since risen to 62% in 2006
Rising DVAR is observed across industries and across destinations
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 23 / 32
Figure 5: Estimated average domestic value added ratio inChinese exports
.5.5
5.6
.65
2000 2002 2004 2006year
Arithmetic mean Exportweighted mean
Average domestic value added ratios of processing exports
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 24 / 32
Figure 6: Estimated domestic value added ratios by HS 2industries
0.2
.4.6
.81
0.2
.4.6
.81
0.2
.4.6
.81
0.2
.4.6
.81
3 7 8 16 19 20 21 22 28 29 30 32 33 34 38
39 40 41 42 43 44 48 49 5254555657585960616263
64 65 66 67 68 69 70 71 72 73 74 76 82 83 84 85
86 87 89 90 91 92 94 95 96
0105: Animal & Animal Products 0615: Vegetable Products 1624: Foodstuffs 2838: Chemicals & Allied Industries
3940: Plastics/ Rubbers4143: Raw Hides, Skins, Leather, Furs4449: Wood & Wood Products 5063: Textiles
6467: Footwear / Headgear 6871: Stone / Glass 7283: Metals 8485: Machinery / Electrical
8689: Transportation 9097: Miscellaneous
(Exp
Imp)
/Exp
Graphs by group_desc
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 25 / 32
Figure 6: Distributions of domestic value added ratios
01
23
4kd
ensi
ty d
var
.2 .4 .6 .8 1x
2000 20032006
Distribution of domestic value added, all sectors
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 26 / 32
Figure 7: Domestic value added vs capital intensity
16:Preparations of19:Prep cereals, f
20:Prep of vegetab
21:Misc edible pre22:Beverages, spir
28:Inorganic chemi
29:Organic chemica
30:Pharmaceutical
32:Tanning or dyei
33:Essential oils
34:Soap, organic s
38:Miscellaneous c39:Plastics and ar
40:Rubber and arti
41:Raw hides and s
42:Articles of lea
43:Fur skins and a
44:Wood and articl
48:Paper & paperbo
49:Printed books,
52:Cotton
54:Manmade filame
55:Manmade staple
56:Wadding, felt a
57:Carpets and oth
58:Special woven f59:Impregnated, co
60:Knitted or croc
61:Apparel and clo
62:Apparel and clo63:Other made up t
64:Footwear, gaite65:Headgear and pa
66:Umbrellas, sun67:Prep feathers a
68:Articles of sto
69:Ceramic product
70:Glass and glass
71:Natural or cult72:Iron and steel
73:Articles of iro
74:Copper and arti
76:Aluminum and ar
82:Tools, implemen
83:Misc articles o84:Machinery and m
85:Electrical mach
86:Railway or tram
87:Vehicles other
89:Ships, boats an
90:Optical, photog
91:Clocks and watc
92:Musical instrum
94:Furniture; bedd
95:Toys, games and96:Misc manufactur
.2.4
.6.8
1
0 .5 1 1.5 2(mean) lcapint2
95% CI Fitted values(ExpImp)/Exp
slope = 0.045; t stat =1.62; N=56
DVA Ratios and Capital Intensity (2006)
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 27 / 32
Why is domestic value added ratio rising?
It could be due to rising production costs in China ) China is losingcompetitiveness
It could be because �rms substitution imported materials withdomestic materials ) China is moving up the value added chain inglobal production network
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 28 / 32
Why is domestic value added ratio rising?
It could be due to rising production costs in China ) China is losingcompetitiveness
It could be because �rms substitution imported materials withdomestic materials ) China is moving up the value added chain inglobal production network
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 28 / 32
Dependent variable: domestic value added ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 29 / 32
Dependent variable: import to material ratio
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 30 / 32
In Summary
Regression results suggest that processing �rms are substitutingimported materials with domestic materials
Evidence of China move up the value added chain and no longer onlyresponsible for the �nal assembly of products
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 31 / 32
In Summary
Regression results suggest that processing �rms are substitutingimported materials with domestic materials
Evidence of China move up the value added chain and no longer onlyresponsible for the �nal assembly of products
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 31 / 32
Conclusions
We assess domestic value added in Chinese exports based on customstransaction data
Our results are similar to those existing papers that use aggregateinput-output table
Domestic value added only consists of about 60 percent of Chineseexports
Bilateral imbalance between US and China could be grosslyoverestimated based on gross trade �gures
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 32 / 32
Conclusions
We assess domestic value added in Chinese exports based on customstransaction data
Our results are similar to those existing papers that use aggregateinput-output table
Domestic value added only consists of about 60 percent of Chineseexports
Bilateral imbalance between US and China could be grosslyoverestimated based on gross trade �gures
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 32 / 32
Conclusions
We assess domestic value added in Chinese exports based on customstransaction data
Our results are similar to those existing papers that use aggregateinput-output table
Domestic value added only consists of about 60 percent of Chineseexports
Bilateral imbalance between US and China could be grosslyoverestimated based on gross trade �gures
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 32 / 32
Conclusions
We assess domestic value added in Chinese exports based on customstransaction data
Our results are similar to those existing papers that use aggregateinput-output table
Domestic value added only consists of about 60 percent of Chineseexports
Bilateral imbalance between US and China could be grosslyoverestimated based on gross trade �gures
Kee and Tang (WB and Tufts) Domestic Value Added in Chinese Exports 12/11 32 / 32