How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive
The rise of China in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of domestic value added (DVA) in exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By our estimation, the share of domestic content in exports by the PRC was about 50% before China's WTO membership, and has risen to over 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).
The views expressed in this paper are those of the authors alone. They do not necessarily reflect the views of the US International Trade Commission, any of its individual Commissioners, any other organization that the authors are or have been affiliated with, nor the National Bureau of Economic Research.