1 Introduction
1.1 Background
China has made great achievements in the export trade since the Reform andOpening up, making itself become an vital driver promoting the global economicgrowth. Relying on the comparative advantage of low-cost labor force, China hasembedded into the global value chain with the processing trade after the accession tothe World Trade Organization (WTO) in year 2001. It is known as the miracle ofexport growth that China has achieved explosive export growth in such a short time.According to the data of global goods export value published by the World TradeOrganization, the total foreign trade volume of China has exceeded 10 trillion yuanfor the first time in 2005, then has exceeded 20 trillion yuan in 2010. Later in 2013,China has surpassed the United States for the first time and become the largest goodsexporter in the world. Five years later, the total foreign trade volume of China hasreached a recording-high position of over 30 trillion yuan in 2018. In addition, theproportion of exports in China's GDP has been gradually rising, from less than 5% in1978 to a peak of 35.87% in 2006. Although the proportion has been declining sincethen, it is without any doubt that the exports in China still play a significant role in thenational economy as one of the three carriages driving the economic growth.
As the most important component of the export trade, the manufacturing exportacts as a decisive factor in China’s total export growth. According to the data ofstatistics, China's manufacturing exports accounted for 84% of the total exports onaverage from 2000 to 2017. However, China’s economy is suffering from anincreasing economic downward pressure since the overall economic development hasreached a stage called the New Normal where the structural contradiction becomesmore and more prominent. China’s manufacturing industry is gradually losing itstraditional which it utilized to flourish for a long term in the past. This type ofinternational competitive advantage was generated by low-cost labour force, whichalso known as the demographic dividend. It should be changed that China a present isfacing the export dilemma of low added value and the lock low value chain position.The seriousness of this problem can be reflected by the fluctuation of China's exportsin the recent years.
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1.2 Significance of research
1.2.1 Theoretical significance
There are a lot of researches on the problem of China’s export value chainupgrading has been done since the end of last century. Many researches show thatChina has successfully realized the embedding of global value chain based onprocessing trade, while for a long time the situation of China's export in the globalvalue chain has not been significantly improved. Then many questions are needed tobe deeply studied and answered. What causes the fact of the global value chainposition climbing obstructed for China’s manufacturing export industries? Howshould developing economies foster new comparative advantages to achieve theupgrading in the global value chain? Under the realistic background of weak exportgrowth rate of manufacturing industry, it is a theoretical problem to be solved forChina to realize the global value chain upgrading of manufacturing industry export,and a more complete and clear study is urgently needed to guide the development ofChina’s export trade.
Based on the perspective of the evolution of labor force supply, an in-depthanalysis of the impact of labor force quantity and labor force skills on China’s globalvalue chain position climbing will be made in this paper. Meanwhile, the necessaryconditions and practical paths of the global value chain upgrading will be alsoincluded since they will be beneficial supplements to the existing theoreticalresearches on the position rising of global value chain .
1.2.2 Practical significance
The long-term low-end expansion is an important manifestation of the restrictedclimb of China’s position in the export value chain, thus it has be attracted greatattention about how to promote the jump out of present global value chain position.From the perspective of the evolution of the labor force supply, this paper willrespectively focus on the theory of mechanism and the empirical tests in order toexplore the different ways of how the number of labor force and the quality of workinfluence the position climbing of the global value chain, and reveal the intrinsicmotivation of rising the global value chain and the key factors to cultivate newcomparative advantage.
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2 Literature review
2.1 Research on global value chain climbing
Generally speaking, there are four ways to realize the value chain climbing:process upgrading, product upgrading, function upgrading and cross industryupgrading (Humphrey, 2002), but the concept of export value chain climbing is notclearly defined at home and abroad. From the macro level of a country's export, thispaper divides the export value chain climb into two categories. One is the functionclimb based on the product smile curve, which shows that the export rises from thelow end of the value chain of processing and assembly to the high end of the valuechain of R&D, design and sales services, as shown in Figure 2.1.1. The other type ischain climbing based on different product technology level, which shows that theexport from labor-intensive industry to capital intensive industry and then totechnology intensive industry gradually rises, as shown in Figure 2.1.2. At present, inview of the problem of export value chain rising, domestic and foreign studies havecome to the conclusion of consistent effect, outstanding dilemma, different factors and different strategies.
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2.2 Research on the evolution of labor supply
Ultimately, economic problems are human problems, and labor force is the corefactor to promote the rise of China’s export industries in the global value chain (Wang,2008). Since the founding of the People's Republic of China, a series of changes havetaken place in China's labor force supply. At present, the academic researches on theevolution of China's labor supply basically focus on the evolution of quantity andquality of labor force supply.
2.2.1 The evolution of labor force quantity
The research on the evolution of labor quantity at home and abroad is mainlyreflected in the change of population age structure. The research indicators includefertility rate, mortality rate, dependency ratio and aging rate. Bloom (2005), forexample, used birth and mortality data from Taiwan, China, noting that the relativeincrease in the former and the relative decrease in the latter increased Taiwan's percapita labor force supply. Cai Fang (2010) pointed out that three quarters ofenterprises in China are facing the problem of the difficult employment, which isrooted in the declining growth rate of working age population in China.
At present, the research on the evolution of China's labor force mainly focuses onthe sustainability of the demographic dividend. The demographic dividend mainlyrefers to the age structure advantage generated in the specific stage of demographictransformation, which is usually reflected in the quantity structure, that is, the agestructure of the population structure, the growth of the working age population and thecontinuous growth of the absolute number, so as to ensure the supply of low costlabor. Most scholars believe that China's demographic dividend is decreasing in therecent years. Since the beginning of the 21st century, China is facing withe problems of the continuous decline of fertility rate, the shrinking of labor resources, theaccelerated trend of population aging and the significant decline of low-age laborparticipation rate. The social characteristics of being old before being rich in Chinahave gradually become prominent, while the demographic dividend has declined, theLewis turning point has appeared, and the infinite supply of labor force hasdisappeared(Gao Chuansheng, 2015). With the gradual disappearance of thetraditional demographic dividend, the comparative advantage supporting thetraditional development path of China’s manufacturing industry has beenunsustainable, and even caused people's concern about the decline or even collapse ofChina's manufacturing industry (Yao Meixiong, 2016).
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3 Mechanism analysis of the impact of labour supply evolution.................................20
3.1 Labor force quantity................................21
3.2 Labor force quality (human capital)......................................21
4 Key indicators selection and model building............................... 26
4.1 Key indicators selection............................ 26
4.1.1 Global value chain position index...........................26
4.1.2 Labour force quantity indicator.............................31
5 Empirical analysis.............................................. 38
5.1 Preliminary analysis................................ 38
5.1.1 Unit root test..................................38
5.1.2 Co-integration test........................38
5 Empirical analysis
5.1 Preliminary analysis
5.1.1 Unit root test
Before regression, the unit root test is taken firstly to avoid the spurious regressioncaused by the non-stationary of panel data.
As shown in table 5.1.1, all variables passed the significance test at the confidencelevel of 5%. The panel data are stable. The null hypothesis that there is no "spuriousregression" cannot be rejected.
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6 Research conclusions and recommendations
6.1 Research conclusions
Labor force supply is an important source of the manufacturing production anddevelopment. Based on the analysis of this paper, the evolution of labor force supplyhas at least three effects on the climbing of the global value chain.
First, the role of demographic dividend. From the perspective of productionefficiency, population dividend refers to the economic benefits realized through thenumber of labor force. The impact of the number of the labor force on the climbing ofthe global value chain is mainly reflected in the realization of production scaleeconomy by expanding production scale, so as to enhance the comparative advantageof production links and adjacent production links. With the continuous realization ofthe optimal production in each link of the global value chain, the climbing of thevalue chain is also gradually advancing. In other words, the impact of demographicdividend on value chain climb has two important characteristics. First of all, with thecontinuous upgrading in the global value chain, the traditional comparative advantageled by the number of labor force supply keeps to weaken, and its impact on the globalvalue chain climbing shows a declining tendency. Secondly, the important premise ofpopulation dividend promoting the role of value chain is to realize the optimalproduction of surplus labor. These two characteristics are the reason why when Chinaentered the low end of the global value chain in the early stage of the Reform andopening up, the demographic dividend played a strong role in promoting the rising ofthe global value chain. However, with the aging of population and the increasingstatus of China in the global value chain, the role of the number of the labor forcesupply in the global value chain upgrading has declined significantly.
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