Industrial Policy and Domestic Value-Added in Production and Exports: The Chinese Experience

Abstract

This paper studies the role of China's industrial policy in the evolving share of domestic value added (DVA) in its production and exports. We propose a method to quantify the DVA share in exports by extending. With national input–output tables and trade statistics from 2007 to 2020, we see a strong increase of the DVA share in exports and a declining share of processing trade. Using propensity score matching (PSM) to select control sectors that are most similar to the ones favoured by China's industrial policies, we confirm the role of industrial policy in these changes.