Endogenous Mechanism of Global Production Network Evolution and China’s Role

Abstract

Building diversified and stable trade relations is a crucial measure to ensure the security of China’s industrial chains. With the rapid development of globalization production patterns characterized by intra-product specialization, the internal structure of global production networks has gradually become more complex. As an important medium for transmitting market information, the complex network structure of production networks not only accelerates the speed of information transmission but also reduces errors in information dissemination, thereby helping to break down information barriers among economies within the production networks. So, does the existing complex structure within global production networks facilitate economies in expanding new cooperation partners and forming diversified and stable production cooperation relationship? In other words, does the evolution of global production networks possess an endogenous mechanism? This has emerged as an important research topic.

Based on trade data for 3,198 intermediate goods across 97 economies worldwide from 2000 to 2021, this article constructs a global production network and employs a Temporal Exponential Random Graph Model (TERGM) to explore the endogenous mechanisms of network evolution. Furthermore, it conducts an in-depth analysis of China’s role within the framework of these endogenous mechanisms. The research reveals the following findings: Firstly, the reciprocal effect of non-reciprocal structures, the transitive closure effect of two-path structures, and the Matthew effect of star-shaped structures constitute the endogenous mechanisms driving the evolution of the global production network. Secondly, China plays a significant role in the evolution of the global production network by constructing reciprocal structures and leveraging the role of third-party markets. Additionally, due to the transitive closure effect arising from China’s intermediary role, economies such as Tanzania, New Zealand, and Panama are expected to expand their export markets in the field of integrated circuits.

This study contributes to the literature in two main ways. First, compared to studies that discuss the evolution mechanisms of the global trade network from the perspective of external network factors, this article explores the endogenous driving mechanisms of the evolution of the global production network from the perspective of internal network structure. This enriches research in the field of trade network evolution mechanisms and provides a new research perspective for economies to expand new trade relations. Second, in contrast to existing studies that primarily analyze China’s role in global economic development based on import and export trade volumes, this article discusses China’s role in the evolution of the global production network from the perspective of the endogenous mechanisms of this evolution. This effectively counters attempts by some Western countries to “de-sinicization” and “decouple” from China, and offers new research insights for ensuring the stability of global and Chinese industrial chains.

The research conclusions have significant practical implications for China in expanding its new “circle of friends”, building a diversified and stable trade pattern, ensuring the security of industrial chains, and forming a new development paradigm of “dual circulation”. They also provide theoretical references for maintaining the stability of global industrial chains. The policy implications of this paper are as follows: First, China needs to take the lead in becoming the “originator” of production cooperation relationship. Second, China needs to take full advantage of its position as a “bridge” in the global production network. Third, China needs to establish an information exchange platform for domestic import and export enterprises.