Servicification and global value chain upgrading: empirical evidence from China’s manufacturing industry

We investigate the effect of servicification on global value chain (GVC) upgrading within the context of China’s manufacturing industry. Utilising comprehensive data on manufacturing value-added, we present new evidence for the influence of servicification on the GVC position of the manufacturing industry in China. We find that although domestic and aggregate servicification enhances GVC, foreign servicification curtails the GVCs of manufacturing firms. Our results show that foreign direct investment, capital intensity and institutions are GVC enhancing. At the same time, the increased global market share of the Chinese manufacturing industry has reduced the GVC of manufacturing firms in China. From a policy perspective, the results highlight the need to take cognisance of the heterogeneity of manufacturing firms and the impact of domestic and foreign servicification on the GVC of manufacturing firms in China.HighlightsTotal servicification and domestic servicification enhanced the GVC position of Chinese manufacturing industry.Foreign servicification worsened the GVC position of Chinese manufacturing industry.Foreign direct investment, capital intensity and institutions are GVC-enhancing, while increased global market share is GVC-impeding.The GFC exacerbated the adverse impact of foreign servicification on the GVC position of Chinese manufacturing industry.