Impact of Global Value Chain Embedding on Total-Factor Energy Productivity of Chinese Industrial Sectors

Abstract

In the four decades since China’s reform and opening up, China has been playing an active role in global value chain (GVC) due to its abundant resources. China has gained enormous benefits from opening up, but has also suffered huge energy costs in the process. In this study, we incorporated global value chains and energy consumption into a unified analysis framework and calculated the energy total-factor productivity (ETFP) of China’s industry and the degree of participation in GVC. In addition, in order to discover the contradictions and problems between China's participation in global value chains and the improvement of total energy factor productivity, the panel smooth transformation model (PSTR) was used to empirically test the nonlinear relationship between the ETFP and the degree of participation in GVC in China. From the analysis results, GVC participation, as well as the subdivided shallow GVC participation and deep GVC participation, first promoted the effect on ETFP and then suppressed it, showing an inverted U-shaped single threshold characteristic. The results indicated that in the progress of starting to participate in the GVC, the effect of technological progress of the GVC overweighed the scale effect of energy consumption, resulting in the growth of ETFP. However, due to the gradual reduction of technology dividends and the “low-end lock-in” situation, China was placed in the value chain by the developed countries, and the technological effect was gradually smaller than the scale effect of energy consumption. As a result, the increase in the total-factor productivity of energy was inhibited. At the same time, in the further examination of industry heterogeneity, the inverted U-shaped influence trend was more significant in high energy-consuming industries. The conclusions of this study can provide a new perspective and policy focus for China's participation in GVC to achieve the goal of increasing ETFP.