Financial Sector Liberalisation and the Climbing of Manufacturing GVCs

Abstract

The National 14th Five-Year Plan and 2035 Vision Outline emphasise the need to promote the integration of China's manufacturing industry and service industry, so as to achieve the upgrading of China's manufacturing industry to the high end of the global value chain. Based on the OCED input-output data and the World Bank STRD data, the study empirically explores the impact of financial sector openness on the upgrading of the manufacturing industry's global value chain by using the global multiregional input-output model and the panel model. The study finds that both the quantity and quality of financial sector openness have a significant effect on the upgrading of manufacturing GVCs, with the quality of financial sector openness having a more pronounced effect, and this conclusion still holds after considering robustness; accordingly, it puts forward policy recommendations for financial sector openness to promote the upgrading of manufacturing GVCs.