Products Trade: Theory, Effects And Applicability To China's Analysis

Intra-product trade is the hot topic both theoretically and practically in recent years. Each party has many divergences about the positive and negative effects of intra-product trade and whether China is adapt to develop it. This dissertation avoids these controversies firstly, it starts with the characteristic of the intra-product trade which develops in East Asia, it elaborates the fundamental principals of intra-product trade, and then from the objective point of view, it combines describing statistics, theoretical analysis and empirical analysis in order to check up the intra-product trade's effects on trade itself and macro economy. Basing on it, we draw the conclusions and bring forward the political advice on the further development of intra-product trade.This dissertation is divided into six sections, the major contents of each part is as follows:The first chapter is the introduction; it introduces the background and study purpose of this dissertation, summarizes the related literature both in China and abroad, explains the logistics and major innovations of this dissertation.The second chapter discusses the characteristics of intra-product trade which develops in East Asia from three angles. The first angle is from the trade flow itself, it discovers the non-linear trend of East Asia trade flow; the second angle is from the economic growth of East Asia and industry upgrade; the third angle is from the whole economy and trade pattern of East Asia, it finds that the goose pattern has gone bankrupt, the East Asia international production network takes its place, China plays an important role in it, and forms a new triangle trade pattern. Subsequently, from the intra-product trade point of view, it makes a preliminary explanation of the characteristics.The third chapter explains the reasons for the intra-product trade, it points out that the modular production which was resulted by the breakthrough of technology and the trade cost reduction leads to intra-product trade. Then, it makes the concept of intra-product trade clear, calculates the vertical specialization of each industry sector in China in the year 1997, 2000 and 2002. It founds that the vertical specialization in communication industry and manufacturing industry is very high. Afterwards, it makes analysis of comparative advantage and scale economy which are the theoretical foundation of intra-product trade. It elaborates the comparative advantage in intra-product trade which was defined by Deardorff. It makes use of two dimension map, illustrates the effects on intra-product trade which were made by comparative advantage and scale economy. Later, it analyzes the two organization forms of intra-product trade, emphasizes the scarce of specific factor leads to outsourcing, the differences of technology endowments lead to vertical specialization, and demonstrates it in virtue of Grossman and Helpman's model. At the end of this chapter, it verifies the factors which could affect intra-product trade, and finds that the favorable infrastructure, low labor salaries, low unit postage and large scale FDI could promote the development of intra-product trade.The fourth chapter reviews the development of processing trade and intermediate trade which are the two forms of intra-product trade in China; afterwards it checks the effects on trade flow which are made by intra-product trade. Then it calculates Chinese trade competition force and export goods' structure by RCA and LFI respectively, finds that in highly intra-product trade industry such as machinery and electronic industry, Chinese trade competition force improves significantly, the relevant export goods' structure enhances. But Chinese factor endowment doesn't change fundamentally; it is still at the low end of value added line. These changes are the feint brought by intra-product trade. In case multinational companies transfer production tache to other countries, Chinese trade competition force may be reverse. Afterwards, it uses mainstream method to calculate Chinese four kinds of terms of trade from 1995 to 2006, finds that Chinese income terms of trade, single factor terms of trade, double factors terms of trade improve except for price terms of trade. It works out import price terms of trade which is composed by four kinds of intermediate goods, and compare it with other import price index, finds that after 2002, the price terms of trade deteriorates, but it is not the result of intra-product trade. At the end of this chapter, it uses statistics of WTO, illustrates that intra-product trade is not the principal reason for Chinese trade friction. Most of intra-product trade's export channel is controlled by foreigners, so it can avoid trade friction effectively.The fifth chapter investigates the effects of intra-product trade on macro economy from five aspects. At first, it distinguishes the effects on technology spillover between vertical specialization and outsourcing which are the two organization forms, introduces transaction cost into Pack and Saggi's outsourcing model, and enlarges the results of original model. It uses economy method to check up the factors which could work on Chinese technology improvement. Then, it analyzes the mechanism which intra-product trade stimulates economic growth, the main mechanisms are the making fully use of the unused resources and the learning by doing effect. Afterwards, it uses simple country economy identical equation to calculate the contribution ratio and contribution degree of intra-product trade on economy. Subsequently, it checks up the relationship between intra-product trade, common trade and GDP, and finds that intra-product export trade could stimulate economic growth further than common export trade. In the third and fourth sector of this chapter, it makes research on the effects of intra-product trade on Chinese income distribution and employment respectively. The main conclusions are that rapid industry upgrade will increase Chinese income distribution disparity; carrying on intermediate products production which is suitable for Chinese labor endowment character could increase employment, decrease income disparity. The fifth sector analyzes the effects of intra-product trade on international balance, finds that intra-product trade is the main source of Chinese trade surplus, its development brings sharp increase of Chinese foreign exchange reserve. Due to the characteristics of intra-product trade itself, it is hard to reduce surplus through exchange rate adjustment. At the end of this sector, it constructs the VAR system, uses impulse response function, variance decompose to make empirical analysis.The six chapter is the conclusion of this dissertation. Through theoretical analysis and empirical analysis, it makes objective judgment on intra-product trade, and provides suggestions on how to further carry on intra-product trade.