Can Global Value Chain Participation Drive Green Upgrade in China's Manufacturing Industry?

Engagement in the global division of labor has greatly influenced China's economy and environment. With the multi-regional input-output (MRIO) framework, we calculate the global value chain (GVC) participation index of China's 16 manufacturing sectors. We also measure the green upgrade index of manufacturing sectors based on the super-efficiency epsilon-based measure (SEBM) and the Malmquist-Luenberger (ML) index. In addition, the effect of GVC participation on the green upgrade of manufacturing sectors is empirically tested with a fixed effects regression model for panel data. Results show that: (1) sectors that rank high in the forward linkage-based GVC participation index also tend to rank high in the backward linkage-based GVC participation index; (2) the ML index is greater than 1 in most years, indicating that the green upgrade of China's manufacturing sectors shows an uptrend; (3) for both forward and backward linkage, the rise of the GVC and complex GVC participation indexes significantly promotes the green upgrade of manufacturing sectors. Finally, GVC participation of China's manufacturing sectors promotes green upgrade mainly through green technology progress. The conclusions have empirical evidence and policy implications for the advancement to medium- and high-end GVC participation and the green transition of China's manufacturing sectors.