China's Electrical Equipment Manufacturing in the Global Value Chain : A GVC Income Analysis Based on World Input-Output Database (WIOD)

This paper empirically analyzes China's electrical equipment manufacturing industry in the context of global value chain (GVC) by using the GVC income approach (Timmer et al., 2013) and the World Input-Output Database (WIOD). Four major questions are addressed by measuring several different indicators. China is found to have comparative advantage and competitiveness in terms of its large share of value added contribution in the world electrical equipment manufacturing industry. However, such competitiveness is not sustainable for two reasons: (1) China is actually a net value added importer, which limits its dominance and development in this industry; (2) the majority of China's GVC income comes from capital investment rather than high-skilled or valuable activities, which means the competitiveness is easy to be taken over as physical capital is more “mobile” than human capital. The paper also finds that the global financial crisis (GFC) did have certain impact on the electrical equipment GVCs in general, but the impact is not necessarily negative and big for each economy. For China, the GFC led to a decrease in the average real wage in this industry due to the decreasing high-skilled labor compensation share and the increasing low-skilled one. The analysis also implies that to upgrade the China's position in the electrical equipment manufacturing GVC may ultimately mean upgrading the agriculture sector such that more labor can be engaged in medium- and high-skilled activities