Abstract: To promote a higher-level opening up during the process of deepening the market-oriented reform has become an important driving force to achieve high-quality development of China's economy. Based on China's Micro Enterprise Database and the Customs Database from 2001 to 2013, this paper studies the effect and mechanism of zombie enterprises on global value chain embedding by identifying zombie enterprises and measuring enterprises' global value chain embedding. The conclusions are as follows: zombie enterprises have significant negative impact on enterprises' global value chain embedding, which is proved to be valid after taking the endogenous problem into consideration and conducting many robustness tests; zombie enterprises have an even significant negative impact on the state-owned enterprises, the foreign-funded enterprises and the processing trade enterprises in the global value chain embedding, while this effect on the private enterprises and the general trade enterprises is rather small. The mechanisms that the zombie enterprises affecting the corporate global value chain embedding are reflected in two ways: one is intensifying the misallocation of industrial resources, thus affecting the global value chain embedding; the other is weakening the market-oriented competition mechanism, which is manifested as restraining the domestic market-oriented process and the entry of foreign investment, thus bringing negative impact on the participation of the enterprises in the global value chains specialization. This study is of great significance for the theoretical interpretation of the true connotation of“promoting opening up through reform”and for the realistic formation of a new pattern of domestic and international dual circulation.

Key words: zombie enterprises, global value chain embeddedness, resource misallocation, market-oriented competition mechanism, dual circulation pattern