Research On Home Market Effects Of Chinese Foreign Trade

Being one of "three carriages" of China's economic growths, foreign trade is extremely important for national economic development; And in the trade, export of mechanical and electrical products is the most important. From the absolute amount and proportion of export, the amount of export of mechanical and electrical products were US$ 549.42 billion, US$549.42 billion, US$821.73 billion and US$1204.53 billion respectively in 2006,2007,2008 and 2009, the proportion of Chinese foreign trade were more than 56.7%,57.5%,57.5%and 54.6% respectively. It can be said the trade of mechanical and electrical products is in a pivotal position in Chinese foreign trade.However, under the background of slow recovery of world economy and the backdrop of trade protectionism, Chinese trades of mechanical and electrical products also face many difficulties, i.e., the lack of growth momentum of international market demand, the continued heating up of trade friction and the continued rising of integrated enterprise management cost. Considering various factors, in order to maintain sustainable development of Chinese foreign trade of mechanical and electrical products, we must find new sources of competitive advantage to change the traditional trade advantage. Home market effect is a new worthy idea to try because it can improve our foreign trade competitiveness of mechanical and electrical products from the costs, trade barriers and other aspects etc. So, whether our foreign trade of mechanical and electrical products existes the phenomenon of home market effect? If so, how to improve the competitiveness of foreign trade of mechanical and electrical products through the home market effect theory?In order to verify the existence of home market effect, this paper research it based on SITC.7 factor of Chinese mechanical and electrical products SITC.7. This paper mainly divides into four areas as follows:First, this paper discusses the content and evolution of home market effect to combine the path of evolution of it through analysis of its theoretical basis. On it, the paper discusses home market effect theory from two levels of theoretical and empirical application, and puts forward a foothold and starting point of this paper. Second, this paper attempts to analyze a full range of home market effect from both static and dynamic perspective, according to the core elements of home market effect model which was built and the adjustment of it during different period. This paper thinks that static analysis in building a theoretical model can explore key elements which can make the functioning of home market effects. Also, the paper analyzes the home market effects from agricultural sector, heterogeneous, enterprise strategic behavior, trade costs and multinational corporations etc from dynamic perspective, focusing on adjustment which is faced at the development process of home market effect. The paper gets to know that the development of static function plays a core basis for the development of dynamic function, and the dynamic function is extension and deepening for the static function which can achieve integration and interaction for both static perspective and dynamic perspective of home market effects analysis.Again, combined with the development process of Chinese foreign trade of mechanical and electrical products, the paper analyzes three digits of SITC.7 sector of Chinese mechanical and electrical products trade by empirical way. Reference gravity model's application methods in international trade empirical research way and estimation method of panel data random effects model, using Eviews 5.0 software, the paper builds a research model to verify the home market effect among three digits of SITC.7 sector of China and its 25 trade partners during 1999-2009.Empirical results show that:among three-digit of 17 categories verified, the model estimation of export of three-digit of 15 categories mechanical and electrical products industry is good, model estimation testing achieves expectation to support the existence of home market effects, i.e., home market effect exists.Finally, from theoretical and empirical level, all the conclusions of this study are summarized, and the corresponding policies are recommended.