Foreign investment policy and changing patterns of Chinese exports: what are the implications?

The aim of this paper is to contribute to the literature on emerging trends in Chinese exports, with a special focus on the role of foreign investment. The structure of Chinese exports has fundamentally changed in the last decade or so, largely due to the involvement of foreign firms in assembly of imported parts and components into final products for re-exports. This phenomenon has attracted several names, including vertical specialisation, outsourcing, intra-product specialisation, global production network and international production sharing. This type of trade now accounts for about one-third of total Chinese exports, which has significant welfare implications as well as implications for public policy, particular for industry assistance and skill upgrading in China..