Domestic Trade Networks and Export Upgrading: Evidence from China’s Domestic Value-Added Ratio

Global value chain disruptions have renewed interest in whether domestic market structure is associated with export upgrading. This paper examines how a province’s position in China’s interprovincial trade network is related to the domestic value-added ratio (DVAR) of exporting firms—a question overlooked in existing studies, which treat the domestic market as a homogeneous aggregate. We construct China’s interprovincial trade network from provincial input-output tables and match network centrality indicators to firm-level microdata from the Annual Survey of Industrial Firms and China Customs records, covering 2007, 2010, and 2012. We find that interprovincial trade network centrality is positively and significantly associated with firm-level DVAR, a result robust to instrumental variable estimation and alternative network measures. The effect is heterogeneous: it is stronger in southern provinces, non-labor-intensive industries, non-general-trade firms, and foreign-invested enterprises. Export propensity significantly strengthens this positive relationship, while firm productivity shows a positive but more weakly supported moderating role. These findings provide evidence consistent with domestic trade network integration playing an important role in export value upgrading, distinct from GVC embedding or foreign technology spillovers, and offer a policy-relevant insight for emerging economies seeking export resilience under deglobalization.