5.Conclusion

China succeeded in structural reform over the decade of 1994-2004 with a clear technology scissors difference.The export share of low-tech diminished while that of high-tech products increased.Nevertheless, this progression stopped from 2004, even dropped. China was recently more and more specialized in medium low qualified sectors, which are based on national resource.

Results calculated by OECD table and NBS table are equivalent.We have reason to believe the robustness of the assumption and the methodology.The clear technology scissors difference over 1994-2004 was under the background of decreasing domestic value added, in other word, of decreasing gain from a unit of export.Chinese export depends more on import than before.The higher tech level, the more need of inputs'import.During recent years,2002-2007, the sectors that increased local content of export are the sectors at low and medium low tech level.As for sophisticated sectors, only electronic component increased domestic value added.The rest all reduced it without stop.Therefore, China's pattern of structural changes is not durable.If it wants to continue development of sophisticated sectors, it must enhance local content of export.

At outset, the United States, Japan and European industrialised countries are the main source of Chinese import of intermediate inputs.Yet, their variations were relatively stable.Asian new industrialized economies and ASEAN countries'contribution increased rapidly, especially for high-tech products.The structure of China's vertical specialisation with Korea and Taiwan shifted from low-tech to high-tech.In this sense, China's increasing VS share promotes other countries'export progression.Asia is the largest beneficiary of Chinese VS of sophisticated sectors.Europe and Latin America profited much from Chinese low-skilled sectors'vertical specialization.

Empirical study proves that China profited from cost advantages and price competitiveness.Its structural changes, i.e.Increasing specialization of sophisticated sectors were based on increasing intermediate inputs'import.This positive correlation is larger for high skilled sectors, while smaller for low skilled one.Manufacturing exports'changes depend more on foreign content compared with overall economy and the dependence rose over times.Foreign content, also named share of VS does not depend on domestic demand.On contrary, foreign demand, export price and import price deflator have positive effect on it.Besides, an appreciation of national currency reduces the need of imported inputs for export.

Nevertheless, Koopman and Dean illustrate advantages of VS calculation distinguishing processing export from ordinary export.This paper does not separate them because of data lack, but we will compute VS share of 2007 as what have done by them and reestimate the relationship in future research.