Chinese Pattern Of Export Expansion

Export expansion model is one of the important topics in international trade research, and different trade theory makes different explanations. Based on the hypothesis of product homogeneity, inter-industry trade theory emphasizes quantity expansion of the similar products, while the intra-industry trade theory, based on the hypothesis of product differentiation, emphasizes variety expansion in export. However, both of them have two implicit assumptions:one is that one country will export to all countries; another is that trade pattern has locked-in effect. But the reality is for a certain merchandise, one country will be exported to specified countries, but many countries haven't the trade flow of this merchandise, thus there exists plenty of "zero" trade flows in bilateral trade flow, and as barriers decrease, these zero trade flows will gradually turn to positive value, and new trade relationship will be built, then the locked-in effect will also be broken. The heterogeneity trade theory was quoted and extended to explain the condition and behavior of bilateral trade flow change from enterprise behavior point of view, and then the concept of "dual margin" was born. The following related research made theoretical analysis and empirical test on the concept, measurement method, influence factors and the effect of dual margin. But the existing researches didn't analyze concretely how a firm's export dual margin is decided and whati are other relevant effects in addition to the economic growth effect. This paper attempts to introduce the features of Chinese export expansion path model, analyze specifically the mechanism of specific determinants and effect of export expansion with the view of dual margin, and provide empirical evidence from Chinese microscopic level product data.This paper firstly makes a literature review about export expansion model under the perspective of dual margin, including the concept, the measurement methods, the driving factors and the effects, and the related studies focused on China is also discussed. Based on this, this paper chooses two commonly used indicators to decompose China's export expansion path model by using product- levels export data. The results indicate that, no matter the analysis of characteristics of time sequence adopted from Feenstra indexes or the cross-sectional comparative analysis by using HK indexes, China's export expansion mainly comes from intensive margin, and further decomposition result shows that quantity index is dominant in intensive margin. The dynamic evolution analysis on China's export expansion path using contribution index shows that, China's export expansion is changing to the model of quantity is dominant, this evolutionary pattern is more and more obvious especially after China's entry into WTO in 2001.Based on the characteristics of China's export expansion, then this paper demonstrates the enterprise decision-making process in dual margin of export. Theoretically, market distance, market access cost and income level of importer are the most important factors for an enterprise to decide which market they should enter into. Because they can influence export market areas by affecting an enterprise's enter cost, by this way they can cause export expansion effects. While factor endowments, technology level and capital input are decisive factors to decide the product combination of export. Firstly, different country has different factors endowments, which decides the country's comparative advantage on different product. So a country who is rich in skilled labor will export more in the skilled labor concentrated industry, and vice versa. Secondly, the level of technology decides the production costs, which will influence the discretion of export products combination. And at the same time, one country's technology level also determines differentiation degree of the export product, which will influence export products combination through market monopoly power. Again, a country's capital investment input will also affect the export products combination. The differences of regional human capital can affect the extensive margin but has no effect on intensive margin. While regional knowledge endowments will affect export intensive margin by having effect on the price of export products. Finally, based on China's empirical data, the regress result shows that market distance and importing country income level have significant influence on decision-making of market scope of export expansion, but the effect of market access costs is not obvious. In product mix decision-making of export, the effect of trade cost is most important, the second is produce price and the average per capita income is the least, the price of factors has no significant impact on dual margin.In the following part, this paper analyzes the effect of export dual margin model theoretically, and takes empirical test using China's export data. Firstly, from the influence of export dual margin on comparative advantage, export intensive margin can reinforce comparative advantage, but excessive intensive margin will make the export pattern lock in the inherent comparative advantage; while export extensive margin can weaken the comparative advantage, but it can reduce the possibility of export comparative advantage locked-in low-end. Secondly, the analysis of price index adjustment shows that if export expands along intensive margin, the supply curve will move outward which can make product quantity increase along with prices bring down; while if exports expanse along extensive margin, new product categories can satisfy consumers' more preference demand, so the demand curve also put outward, which will make export volume increases but prices fell slowly even prices will rise. Thirdly, from the influence of dual margin on export income volatility, export expansion along intensive margin would increase export volatility, and the export risk will bigger, while export extensive margin would decrease export volatility and reduce the risk of export.Based on the above analysis, this paper finally puts forward some relevant policy suggestions to promote China's export expansion sustainable and healthy development and obtain more trade benefits. Meanwhile, this paper presents the imperfections and the direction of further research.