A new method for measuring industrial chain risk exposure: A regional perspective in China

Abstract

We extend the existing framework for decomposition of production length structure in global value chains and propose a novel concept and measure of industrial chain risk exposure on both the demand‐side and supply‐side at the region‐sector level in China. Using data from WIOD, ADB‐MRIOT, and China's multi‐regional input‐output tables, we measure and analyze the industrial chain risk exposures, and risk‐return ratios on the demand‐side and supply‐side of each region‐sector in China from 2002 to 2017. Our results reveal the following key insights: First, inland regions exhibit high domestic industrial chain risk exposures, while coastal regions have high global industrial chain risk exposures, a pattern consistent at the region‐industry level. Furthermore, demand‐side industrial chain risk exposures surpass supply‐side exposures within region‐sectors. Second, High‐tech manufacturing industries display greater risk exposure compared to other sectors. Third, Guangdong and Shanghai, as the main regions of China's international trade, share similar global industrial chain risk exposures to those of Germany and South Korea. Fourth, the bilateral demand‐side exposures of the industrial chains in each region are asymmetric.