Abstract

In response to fierce competition in the global market, multinational corporations（MNCs）allocate resources on a global scale, and constantly innovate economic organization. Since in the late 1980s, Overseas Chinese entrepreneurs and multinationals of Japan, US, and so on have massively increased seeking efficiency investment in East Asia and business outsourcing. Increased FDI mainly exploited the factors cost advantage in East Asian region to improve product competitive advantage in developed economies'markets. At the same time, each economic entity in East Asia actively implemented economic liberalization policies, as well as the rapid development of communications and transportation technologies has continued to reduce transaction costs. These have rapidly spurred East Asia production networks（EAPNs）servicing for MNCs' global strategy to develop, to extend in East Asia region. East Asian economic entities, particularly developing economic entities, have become MNCs'（i. e. flagship firms）labor-intensive or low-technology intensive production departments, assembly departments. Today, this division of labor in East Asia still expands and promotes regional cooperation.

To East Asian suppliers integrated in East Asian production networks （EAPNs）, they have developed a close relationship with the network enterprises came from developed countries and frequently gained advanced knowledge passed through the production network. Furthermore, it forced suppliers to improve manufacturing or research and development（R&D）capabilities to meet the flagship firms or high-tier suppliers' requirements. So the local suppliers' capacities have obtained a certain degree of increase after joining EAPNs. However, because of their dependence on high-tier suppliers or flagship firms' distribution channels or key parts and components supply, the local suppliers would most likely be locked on fixed position in EAPNs and it is difficult to gain further industrial upgrading for them, which means always locating in lower added value position of a value chain. Studies have shown that many industrial suppliers in China are still in the low-value links. Labor-intensive links still continue to expand parallelly and consume lots of resources, and these probably form inertial development pattern, even reject efforts to promote the technology capacities, or sales capabilities. However, Chinese advantages, such as land cost advantage, labor cost advantage, are shrinking.

It was fast horizontal extension of EAPNs that resulted in a rapid expansion of manufacturing capacity in East Asia which leads to East Asian region increasing dependence on developed economic entities markets in Europe and America. Especially dependence on the United States market has been far more serious, causing trade imbalances. At the same time, East Asia dependence on energy, raw materials, capital and technology from outside region was deepened. But there was slowly growth of demand of Europe and America from East Asia; and demand decrease sharply during the economic crisis. This always makes the economic development of East Asia be seriously constrained by extra-regional markets.

So East Asia must require gradually transformation of economic development pattern. It needs East Asia multinational division（i. e. EAPNs）constantly changing. As the global strategies of flagship firms and manufacturing cost of every region are changing, EAPNs itself are in constant development and adjustment. This allows more local suppliers to join the EAPNs, access to opportunities to form capacity; also allow the existing suppliers which probably be replaced by new suppliers to have more opportunities to move up the position in the value chain.

Chinese local suppliers may exert different effects on adjustment of EAPNs in according to their own power. They may seize opportunities to achieve value chain upgrading during the development and adjustment of EAPNs. Some suppliers may develop new own production networks at other regions, thereby raising the position in value chain. Some improve R&D level to master some patents through their efforts based on advanced knowledge acquired by production networks. Some improve process technology, focusing on parts and components elaboration processing to improve product competition advantage. Some ignore adjustment of production networks and may be replaced by other suppliers, and they may face bankruptcy, etc. . Chinese authorities of various industries and all levels of government had better be based on the law of development and adjustment of various industries production networks and the division reality of labor; exert appropriately effects on adjustment of the EAPNs, exploit the chances of adjustment of the EAPNs, promote industries upgrading.