Cross-Strait Economic Integration and Regional Value Chain Participation: Evidence from Taiwan’s Manufacturing Sector (2010-2023)

Abstract

This study uses panel data of Taiwan's manufacturing industry from 2010 to 2023 to empirically test the impact mechanism and effect of cross-strait economic integration on Taiwan's regional value chain participation. The study finds that cross-strait economic integration has significantly increased the value chain participation of Taiwan's manufacturing industry, but at the same time has increased Taiwan's dependence on the mainland market. Specifically, for every 1% increase in cross-strait trade intensity, Taiwan's value chain participation index increases by 0.23% and export complexity increases by 0.15%. Heterogeneity analysis shows that the value chain deepening effect of high-tech manufacturing (such as the electronic information industry) is more significant, while traditional manufacturing is mainly manifested in the expansion of participation breadth. The study further finds that after the signing of ECFA, the deepening of cross-strait value chain connections has not significantly improved Taiwan's position in the global value chain, but may lead to a "dependency lock-in" phenomenon. This finding is of great significance for understanding the welfare distribution effect of regional economic integration and its policy implications.