Specifically, we split the conventional IO tables of China for 2007 and 2010 into transactions between six groups of firms, defined by ownership type and firm size, namely large SOEs (LSOE), small and medium SOEs (SSOE), large foreign invested enterprises (LFIE), small and medium FIEs (SFIE), large private (LP), and small and medium private enterprises (SME). Based on the six-group split of the IO tables, we report our results for four types: SOEs, FIEs, LPs, and SMEs. We find that SOEs’ value added (VA) exports are significantly larger than their gross exports, contrasting with the common finding of low value added in Chinese exports (Chen et al., 2012; Koopman, et al. 2012). Specifically, the value added to gross export (VAX) ratio of SOEs is estimated to be 1.2 in 2007 and 1.8 in 2010, compared to around 0.35 for FIEs in both years. These results contrast with the findings in developed countries, such as the United States, where large firms tend to have lower VAX. Among private firms, large firms’ VAX is around 0.7 for both years, while SMEs’ VAX exceeded 1 for both years, and increased from slightly above 1 in 2007 to 1.3 in 2010.

Another advantage of splitting the conventional IO table into sub-accounts based on available micro data is that we can analyze trade between different firm types in the domestic segment of GVC in great detail. About 80% of SOEs’ VA exports are indirect (exporting through other firms) in 2007, which increased further in 2010. Of these indirect exports, about 40% is through small firms, both domestic and foreign. These findings suggest that although SOEs’ direct participation in exporting has been low, its actual participation and impact on China’s exports have remained high and have been overlooked. Similar to SOEs, LPs and SMEs both have a large share of indirect VA exports, though LPs have a much lower VAX. On the other hand, FIEs tend to export more directly.

We also investigate the reasons behind the high indirect export participation for both SOEs and SMEs. Turning to the industry distribution of indirect exports by firm type, we find that SOEs’ indirect exports are due to their prevalence in upstream or non-tradable industries, such as energy and mining; metal and non-metallic mineral extraction; electricity; gas and water supply; and the financial sector. This may not be surprising, since we also observe high indirect export shares in similar industries for large domestic private firms. One can argue that this could also be true in other countries, almost by definition. However, what we intend to show is that SOEs, not only large firms, have been dominating the upstream of the domestic segment of GVC in China, possibly due to the sequential pattern of privatization. While the political economy factors behind this pattern are beyond the scope of this paper, we believe that a systematic documentation can already provide important insights for understanding China’s past and future economic growth. The conventional view is that China’s export growth is largely driven by the dynamic labor-intensive private sector, especially the foreign-dominated processing trade sector. Our findings add to this conventional view by showing that SOEs, through their protected position in the upstream, have 3