Global Value Chain Reconfiguration and Rebalancing the World Economy

Using the World Input-Output Database (WIOD) spanning from 1995 to 2010, this paper firstly investigates the drivers of Global Value Chain Reconfiguration (GVCR) and their influencing mechanisms; empirical results indicate that technological progress and regional cooperation have significantly positive and similar effects on GVCR while labor cost has a significant negative but much less impact. Secondly, it confirms the significantly positive relationship betweent GVCR and global imbalance, the internal mechanism of which is global economic structure and industrial structure imbalance. Finally, we propose that restructuring global value chains by technology progress, regional cooperation and labor cost can help to adjust global economic structure and industrial structure imbalance, and thus to rebalance the world economy. For China, technological progress should be achieved by both self-innovation and technology import. Promoting regional cooperation with the key countries in the global production networks and regional cooperation should be raised to the national strategic level. The rise of labor cost indicates the urgency of industrial upgrading and transition as well as implies the ability to undertake international industrial transfer. The focus of improving institutional circumstance should be on the difference between manufacturing and service industry's institutional requirements