Processing trade in Chinese interregional input–output tables: construction and application

Abstract

We construct new interregional input–output tables for China, which can be used to analyze changes in the interindustry linkages within and between eight Chinese regions, and their consequences. We claim that analyses based on these tables yield more accurate results than analyses using existing interregional input–output tables for China, because our tables explicitly account for a typical feature of the Chinse economy: the importance of processing exports activities. These activities rely heavily on imported inputs and much less on inputs sourced from domestic regions. Accounting for such differences between processing exports and other production activities reduces aggregation biases. We illustrate the usefulness of the tables by computing supply chain fragmentation indices for China and quantifying the biases that are avoided by using our input–output tables instead of conventional ones. We make our tables (for 2002, 2007 and 2012) publicly available.