Improving financial productivity and upgrading in global value chains

This study integrates the financial productivity improvement in a multi-country, multi-sector Ricardian model to examine its impact on China's position within global value chains (GVC). We also differentiate between the trade elasticities of the financial sector concerning intermediate inputs and final consumption. Through counterfactual analysis, our research reveals a consistent upward trajectory in China's GVC positioning at aggregate and sectoral levels that is attributable to financial productivity improvement. This ascent is facilitated by input-output links and costsaving effects. The findings validate the significance of financial productivity improvement in advancing China's GVC positioning.