Establishment of Free Trade Zones and the Upgrading of Enterprises in Global Value Chains:A Quasi-natural Experiment Based on the Shanghai Free Trade Zone
Free trade zones(FTZs)are major innovative practices in China's pursuit of high-level opening up.Their impact on the positioning of enterprises in global value chains(GVCs)is an important issue of academic concern.Using highly disaggregated firm-level data between 2000 to 2014,we use the establishment of the Shanghai FTZ as a quasi-natural experiment to examine the impact on the positioning of enterprises in GVCs.We find that the establishment of the FTZ has overall reduced the upstreamness of enterprises in the global value chain,mainly because the import of higher-quality intermediate goods by enterprises within the FTZ has replaced domestic production,squeezing the space for enterprises to climb up the global value chain.The clustering of new enterprises in the FTZ has also lowered the average positioning of their GVC embeddedness,while the financial facilitation of the FTZ has alleviated financing constraints and helped enterprises to climb up the GVC.Further heterogeneity analysis shows that the negative policy effect of the FTZ on GVC positioning is more pronounced for high-tech industries,capital-intensive industries,enterprises with a high foreign capital share,and large-scale enterprises.
Free Trade ZoneGlobal Value Chain EmbeddednessImport Product QualityFinancing ConstraintsIndustrial Agglomeration
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