Social Sciences in China (Chinese Edition)

No.1, 2019

The Conjoint Circulation Theory of China’s Open Economy: Theory and Argumentation

(Abstract)

Hong Junjie and Shang Hui

Within the framework of the international commodity division of labor, we put forward a conjoint circulation theory for China’s open economy. Our exploration of the global division of labor hinges on emerging market economies and the internal mechanisms that affect changes in their position in the division of labor. Our theory demonstrates the interconnection of developed and developing countries’ value chain circulation, in which China plays a growing role as the hub of conjoint circulation. Using bilateral trade data together with big and micro-level data to test this theory empirically, we find that Chinese enterprises can boost their position in the division of labor in developed countries’ value chain circulation through the application of new technology, but this space gradually narrows. Chinese leadership of developing countries’ value chain circulation is conducive to Chinese enterprises’ advancing to higher levels of the value chain. China must strengthen its position as the hub of this conjoint circulation.