China’s Evolving Role in Regional Production Networks: Evidence from the ICT Industry

Abstract:China’s accession to the WTO in 2001 and the subsequent liberalization of its FDI and trade policies have boosted the country’s exports and facilitated its improved participation in regional production networks. This paper builds on the existing literature on production networks by examining some of the recent structural changes in China’s intermediate goods trade with East Asia. Chinese policies to promote technological progress and indigenous innovation have been instrumental in bringing about such change, most of which can be captured by shifts or movements in the nation’s intra-industry trade index for intermediate goods. Two significant findings emerge from the empirical exercise: first, China is progressively reducing its reliance on import of intermediate goods for production and export; and second, the country remains integrated with East Asian economies in several technology-intensive sectors such as machinery and electronic devices.