Abstract: As an important feature of microeconomic operation, the impact resulted from the process of the factor prices marketalization lagging behind the benefit allocation share of China's manufacturing industry embedded in global value chain from the product market is otherwise always neglected. On the basis of inducing and deducing the related theoretical logic, this paper measures the domestic value-added export at the level of enterprises through merging the Industrial Enterprise Database and the Customs Database from 2000 to 2012 and conducts an empirical test. In order to reduce the impact of endogenousness, it further chooses the number of years from taking office to retirement of the provincial Party secretaries of each province as the instrument variable of factor price distortion. The findings show that the factor price distortion calculated no matter by random frontier or by FanGang index method would significantly hinder the improvement of domestic value added export of China's manufacturing industry. The impact of the factor price distortion on the domestic value-added export is mainly through two channels, i.e., inhibiting the internal R&D investment of enterprises and preferring state-owned resource allocation among enterprises. In terms of the controlled variables, the indexes of the R&D input are significantly positive, while the indexes of most other controllable variables cannot pass the significance test.

Key words: factor price distortion, domestic value-added export, resource allocation