Abstract: This paper tries to integrate the new paradigm of the vertical specialisation with the driving forces of international trade, which have been testified by different paradigms of international trade theory, so as to build up an econometric model. Then, by this model, we use China’s 1992–2009 trade data of manufacturing industries to regress the dependent variables of trade volume, competitiveness with the interactive variables built by multiplication of vertical specialisation index and such factors as the ratio of capital to labour, economies of scale and total factor productivity. Our findings have justified that along with the vertical specialisation, those factors have contributed a lot to the growth of international trade and the upgrade of international competitiveness. But the interactive variable of vertical specialisation and economies of scale has not been justified as a factor to increase the international competitiveness of China’s manufacturing industry. Not only has this paper made a tentative attempt in explaining the driving factors behind the rapid aggregate growth in China’s foreign trade, but also in exploring how the global vertical specialisation has shaped and upgraded the industrial structure of China’s exporting manufacturing sector.
International Journal of Economic Policy in Emerging Economies, No.4,2013.