The Impact of China's Participation in the Value Chains of its Trading Partners on the Carbon Embodied in the Bilateral Trade of Forest Products

Abstract

To recalibrate the connection between participation in global value chains (GVCs) and carbon embodied in trade is of great importance because it provides significant insights about how China's forest products industry should integrate into GVCs and promotes the reduction of carbon embodied in trade. This paper obtains panel data related to the GVC participation of, and carbon embodied in, the trade between China and 43 of its trading partners from 2000 to 2018, and uses fixed effects and quantile regressions to explore the impact of China's participation in the value chains of its trading partners on the carbon embodied in the trade of forest products from the perspective of bilateral trade. It is found that (1) China's participation in the value chains of its trading partners significantly reduces the carbon embodied in forest product trade, especially that of pollution-intensive products (e.g., paper and its products); (2) China's participation in the value chains of high-income countries reduces the carbon embodied in forest product trade; (3) foreign direct investment (FDI) in trading partners weakly suppresses the carbon embodied in the trade of Chinese forest products; (4) the effect on the carbon embodied in the trade of Chinese forest products is only suppressive when China's degree of participation in the value chain is higher; and (5) China's forward participation in the forest product value chains of its trading partners reduces its overall carbon embodied in trade, while the backward participation has the opposite effect.