Investment

The document examines how global value chains (GVCs) allow countries, particularly developing ones, to specialize in discrete production tasks rather than complete products. It highlights the critical role of foreign direct investment (FDI) and multinational corporations in organizing these chains. Using China as a primary example, it details how special economic zones and preferential policies facilitated rapid GVC integration. The text argues that while manufacturing openness is common, developing countries often maintain restrictions on service sectors, which hinders productivity. It further suggests that 'deep' trade agreements—those covering investment, competition, and intellectual property—are more effective at increasing GVC participation than simple tariff reductions. Finally, it addresses the need for more inclusive globalization to support SMEs and regions like Africa and South Asia.

• Foreign direct investment (FDI) is essential for the creation and operation of global value chains, as multinational corporations internalize risky activities while using arm's-length transactions for standardized inputs.
• China's integration into GVCs was driven by a combination of comparative advantages and government policies, including the use of special economic zones (SEZs) and foreign invested enterprises (FIEs). Between 1990 and 2014, China received approximately $1.6 trillion in FDI, primarily in downstream labour-intensive manufacturing.
• Developing countries often maintain a policy divide between manufacturing and services, protecting service sectors from imports and FDI despite evidence that open service sectors improve manufacturing productivity.
• The share of services in value-added trade has increased significantly; for example, about 55% of the value added exported from the US and nearly 70% from the Netherlands comes from service sectors.
• 'Deep' trade agreements, which include legal commitments on investment, competition policy, and intellectual property rights, are more effective at expanding GVC involvement than traditional tariff-cutting agreements.
• The institutional quality of neighboring countries impacts a nation's GVC participation; countries with 'bad neighbours' show fewer exports in contract-intensive sectors even when their own institutions are strong.

APA

Zhi, W., & Dollar, D. (2018). Investment. World Economic Forum. http://www3.weforum.org/docs/WP_Global_Value_Chain_Policy_Series_Investment_report_2018.pdf

Chicago

Zhi, Wang, and David Dollar. Investment. World Economic Forum, 2018. http://www3.weforum.org/docs/WP_Global_Value_Chain_Policy_Series_Investment_report_2018.pdf.

Wikipedia

{{cite report |last1=Zhi |first1=Wang |last2=Dollar |first2=David |title=Investment |publisher=World Economic Forum |date=June 2018 |url=http://www3.weforum.org/docs/WP_Global_Value_Chain_Policy_Series_Investment_report_2018.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{zhi2018investment, author = {Zhi, Wang and Dollar, David}, title = {{Investment}}, institution = {World Economic Forum}, year = {2018}, month = jun, url = {http://www3.weforum.org/docs/WP_Global_Value_Chain_Policy_Series_Investment_report_2018.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }