Changes in domestic value added in China’s exports: a structural decomposition analysis approach

Abstract

China’s exports can be divided into three types: processing trade, normal trade of goods, and normal trade of services. Based on China’s non-competitive input–output table that captures the processing trade, we calculated domestic value added (DVA) in exports for 2002, 2007, and 2010. We then used structural decomposition analysis to examine six factors that could be the driving forces of changes in DVA for exports under the three kinds of trade in the periods 2002–2007 and 2007–2010. The results show that the six driving forces have different effects on exported DVA. Normal trade is the dominant contributor to the increased DVA of China’s exports. The increase in DVA generated by exports is due mainly to the expansion of export volume. The most effective way to increase exported DVA sustainably is to expand fabrication effects.