A Study Of Changes And Distortion Of Chinese Commodity Trade Pattern

The dissertation studies the changes and distortion of Chinese commodity trade pattern in 1992-2008. Three reasons can be enumerated to explain the choice of this topic: Firstly, the commodity trade has made great development which facilitates the development of Chinese economy; Secondly, the excessive trade surplus of China has been widely scrutinized by almost every trade partner country, with an increase in protectionism and trade conflicts. A mainstream opinion links the trade surplus to Chinese investment-saving disequilibrium and the global imbalance, casting doubts on the trade pattern and even the economic development pattern of China; Thirdly, China has long adopted policies to support exports of manufactured products with an attempt to reinforce the relevant industries. However, only a few studies empirically analyze the effects of the strategic trade policies, leaving extensive space for further arguments. Consequently, a thorough analysis is necessary to explore deep into the dynamic features of Chinese commodity trade pattern.The study is structured as follows:Chapter 1 introduces the background of the theme, major conceptions, frame and principal innovations of the study. Chapter 2 reviews the literatures on the theory of comparative advantage and strategic trade policy, pointing out that the two theories are not radically contradictory, but the latter may tend to be embedded with mercantilism. Basing on the hypothesis of trade pattern equilibrium, where net exoport ratio (NRX) of an product is predetermined by its revealed symmetric comparative advantage (RSCA), this chapter develops an analysis framework of trade pattern distortion as well as the propensity for trade pattern distortion. Moreover, 260 SITC Rev.3 3 digit level trade products are aggregated into 5 technology-based product categories, namely primary products, resource-based products, low, medium and high-technology products for further empirical tests.Chapter 3 answers the question of "what is the current situation of the trade patterns in 2008". The distribution of Hillman conditions, RSCA and NRX and their combination, as well as the trade pattern distortion propensity index, are separately described for major products of the 11 technology intensity based product categories. China has revealed comparative advantage in low-technology manufactured products and the labour intensive process of high-technology electronic and electrical products, while imports of primary resource products, resource-based products and intermediaries for processing trade are especially emphasized. Moreover, trade pattern distortion propensity index analysis provides more evidence for the mercantilist oriention of Chinese strategic trade policy.The question of "How has the Chinese trade patterns evolved" is anwered in Chapter 4. Lawrence index analysis reveals that the structural changes of Chinese imports are larger than that of exports, but there exist differences for each technology-based product categories; Hillman condition tests show an increased consistence of revealed comparative andvantage and specialization comparative andvantage; Cantwell tests are conducted to capture the dynamics of RSCA and NRX. Both RSCA and NRX are increasing for medium- technology and high-technology product groups and are declining for primary and resource-based products. What is noteworthy is that the low- technology group of "textile, garment, footwear" is winning in NRX but losing in the sense of RSCA, indicating an apparent preference for trade surplus. The changes of trade pattern and trade pattern distortion propensity for each product group are studied individually, strong evidences are found that the positive trade pattern distortion has been tending to be increasingly serious. Chapter 5 answers "Why do the trade patterns distort". A dynamic model is derived from Cobb-Douglass function, with trade balance, rural labor mobility, intensity of government financial expenditure and capital deepening as explaining factors for labor productivity. Short-run and long-run Granger causality tests indicate that Chinese external disequilibrium is largely the result of domestic institutional changes. Although a substitution relationship is idendified between the export-oriented economic development and the relative intensity of fiscal intervention, there can be found no evidence that net exports can significantly improve Chinese labour productivity in the short-run. There exists rather negative long-run Granger causality from net exports to GDP per labour, implying the low efficiency of China's export-oriented economic development pattern.Chapter 6 attempts to answer the question of "How is the performance of Chinese strategic trade policy". Panel cointegration and Granger causality tests are conducted to explore the relationship between RSCA and NRX for 11 categoried products. The results show that NRX is generally based on RSCA, while the strategic trade policy is only effective for mineral primary products and medium-technology automation equipments, with very limited effects for most other products. In general, the performance of Chinese strategic trade policy is poor, in the sense of improving comparative advantage by encouraging exports.In Chapter 7 the dissertation concludes, aiming to answer the questions of "How to adjust the Chinese commodity trade patterns". Four principles are presented: 1) Abandoning the mercantilist oriention which is featured with the over-emphasis of exports and trade surplus; 2) Insisting on the progressive patterns of technology upgrading and industrial adjustment, according to the rule of technological change and on the basis of current comparative advantage; 3) Aiming at long-run technological progress and industrial structural change when making strategic trade policies and industrial policies; and 4) Considering structural differences among the product categories and making differentiated trade and industrial policies, allowing support, laissez-faire, or disencouragement for commodity exports.