A Study Of Intra-Industry Trade Between China And The Developed Countries

Most empirical and theoretical researches on intra-industry trade have focused on developed countries instead of developing countries, and there are few studies with respect to China until now. The present paper is intended to make an effort on China's intra-industry trade, and the research target is the detailed developments in intra-industry trade between China and developed countries.Firstly, research effort was devoted to analyzing general development of bilateral intra-industry trade between China and developed countries. The result of general research showed that the level of intra-industry trade between China and developed countries (including the United States, Japan and the European Union) had been increasing on the whole since 1980s. By the end of 2001, the GL index between China and the United States had reached 0.449, and the corresponding figures in China's trade with Japan and the European Union were 0.457 and 0.487 separately. These figures indicated the trait of the bilateral trade mode, namely, the share of intra-industry trade had increased to nearly approach that of inter-industry trade, but the latter was still playing the leading role. From the result of classified analysis of 35 industries important in bilateral trade and then the specific study of the representative product (the 85th division in HS), we could not only obtain the detailed development of intra-industry trade in main industries, but also draw a conclusion that bilateral intra-industry trade type between China and developed countries was still of vertical nature instead of horizontal.Enlightened by several western researchers' methods, this paper set up an estimated equation choosing five independent variables in the positive analysis of identifying determinants of intra-industry trade between China and developed countries. The regression results based on data from 1986 to 2001 indicated that intra-industry trade markedly increased with average per capita income improving, average market size enlarging and gap of per capita income reducing. The result of gap of market size exerting a negative effect on intra-industry trade emphasized the conclusion that the bilateral intra-industry trade is of vertical nature. With regard to FDI, the paper carried out a cross-country study then a detailed analysis on Japan's investment in China. Promoted mutually with China's processing trade and the ratio of products exported back to Japan was higher, Japan's direct investment in China exerted more notably positive influence on bilateral intra-industry trade than other developed countries'.In the end, the paper summarized five important characteristics of bilateral intra-industry trade between China and developed countries with a background of foregoing research achievements, and then analyzed the trend of bilateral intra-industry trade development based upon the future changes of country- and industry-specific determinants since China being a member of WTO.