| In the process of the reform and opening, great achievement of Chinese economy has been gained, especially, after China joined in WTO, Chinese economy has gradually been one of the important parts of the world economy .As Chinese government promises to decrease the tariff and takes some measures to improve, however, there is a disharmonic rhythm in this gallant movement-----domestic market fragmentation, according some scholar's measure abroad, since the opening, the trade barriers between provinces became so serious that the proportion of trade between provinces descends obviously, tariff level in some areas is as high as some sovereignty's, which disobeys the WTO rules and delays our economy seriously. Domestic market fragmentation is one of the local protectionism in the process of the economic reform, which chiefly concerns with local government's advantage. Its definition, as we can see, is that local government utilizes several administration measures to prevent local market from non-local manufactures, and to limit local capital flow out. We can also regard it as the result of the interest distribution between local governments. And it has hindered the development of market economy especially when China has become the member of the WTO. this situation will take effects on economic measures directly and indirectly,adjustment of industrial structure,economic collaboration between provinces and so on. So the study of domestic market fragmentation has significant meanings to the sound development of our whole economy. The purpose of the study in this article is to expatiate the current situation of the domestic market fragmentation, and analyze the causations of this phenomenon, and enumerate the opinions of various economists, then explain segmentation of domestic market from economics, in the end, propose countermeasures to deal with the market fragmentation. The logic structure of the article is divided into five chapters. Chapter one is the introduction, in this chapter, we can learn the current situation of domestic market, the purpose,significance and methods of this research. Chapter two summarizes the standpoints of the economists who concern this phenomenon, basically, most scholars admit that the domestic market fragmentation is really exist in some level, and then it synthesizes prices, trade barriers and transport states to set up an initial trade barrier model. the whole countries' and provinces' price indexes, distance indexes and transport state indexes from 1978-2003 have been applied to this model to work out the trade barrier of provinces of china . Thus the domestic market segmentation state in nearly 20 years had been quantitative analysis. The degree of china's domestic market segmentation and variation tendency is clear. At last the chapter two make a conclusion and gives some explanations for the missing data. Chapter three analyzes qualitatively the various reasons of Chinese domestic market segmentation, mainly includes historic factors,power division of administration system and other related factors. Chapter four explains the phenomenon with game theory and customs union theory, first tell the motivation of local governments with prisoner's dilemma model separately, then analyzes the integrated wealth effect of the domestic market by using the theory of customs union theory. In this chapter, customs union theory and the present conditions have been connected to discuss the realistic meaning of the domestic market integration. The five chapter is suggestions to drive the domestic market into integration on the base of the analysis and current reality .the proposes of separating enterprises form government, the tax system reform and the legal construction will be the most important to the get rid of the fragmentation of domestic market in the future, some experiences of U.S.A and Europe Union are mentioned before these suggestions. According systemic analysis mentioned above, we can know, this phenomenon is not set up in several days, and also is not so...
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