Smart Cities and Global Value Chain Upgrading: Evidence from China

Abstract

China has been on a new journey pursuing high-quality development, an important element of which is global value chain (GVC) upgrading. The smart city pilot policy, which aims at reshaping the urban development model in China, is carried out and regarded conducive to achieving high-quality development. Nevertheless, regarding whether and how smart cities could promote GVC upgrading, research is scant. We adopted the approach of time-varying difference-in-differences (DID) and used a dataset that encompassed 174 prefecture-level cities between 2005 and 2017 to investigate the impact of China’s smart city pilot policy on the GVC upgrading of cities. The findings indicate that, firstly, GVC upgrading is significantly enhanced by building smart cities in China. Secondly, this favorable influence on GVC upgrading is mainly through channels of informatization, innovation, and industrial structure adjustment. Thirdly, the influence is more pronounced in eastern cities and cities with better conditions in terms of human capital, fiscal capacity, and information infrastructure. This research provides evidence and policy implications for China to move forward with the smart city establishment in a bid to upgrade GVCs and achieve high-quality growth.