Growing Like China: Firm Performance and Global Production Line Position

Abstract

Global value chains have fundamentally transformed international trade and development in recent decades.We use matched firm-level customs and manufacturing survey data, together with Input-Output tables for China, to examine how Chinese firms position themselves in global production lines and how this evolves with productivity and performance over the firm lifecycle.We document a sharp rise in the upstreamness of imports, stable positioning of exports, and rapid expansion in production stages conducted in China over the 1992-2014 period, both in the aggregate and within firms over time.Firms span more stages as they grow more productive, bigger and more experienced.This is accompanied by a rise in input purchases, value added in production, fixed costs incurred, and profits.We rationalize these patterns with a stylized model of the firm lifecycle with complementarity between the scale of production and the scope of stages performed.

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