By Sun Zhiyan, Department of Development Strategy and Regional Economy, DRC; Zheng Jianghuai, Nanjing University

Research Report, No.182, 2020 (Total 5926) 2020-7-16

Abstract: In the context of digital transformation of global value chain, the technological monopoly advantages and network polarization effects of developed economies have become increasingly profound, which has made it probable for the developing countries to be trapped in the low- and middle-end functions. China is facing numerous challenges in its efforts to get beyond the functional traps in global value chain and move forward towards higher-end transformation. In this regard, this paper has proposed the following policy options. 1. Compared with the implementation of general industrial policies, China needs to focus on strategic industries with notable impact on national economic development, high technologies and long industrial chains so as to cultivate its more specialized technological edge; 2. The role of China’s mega-markets and its relatively completed productivity system need to be given full play and the support of policies on the demand side need to be strengthened and based on intermediate products with high technologies. 3. The physical layout of fundamental infrastructure for major scientific research relying on key urban agglomerations needs to be incorporated, in an extensive manner, with global value chain network at a higher level. 4. The goals of employment stability in the short run and the pursuit of economic development with higher quality in the mid- and long run need to be balanced so as to guide the labor flow to technology-intensive and innovation-oriented industries.

Keywords: global value chain, functional traps, digitization, industrial policy