A Study On Complementary Relationship Of Economy And Trade Between Mainland And Hong Kong

"Complementary relationship of economy and trade" is defined firstly. Based on extensively analyzing time series data and cross section data of Mainland and Hong Kong, according theories of Demand Similarity, Complementary Advantage of FDI, and Core—Periphery, and using methods and tools of Trade Complementary Degree, Gravity Model, Exponents of RCA, HP Filter, Coefficient of C-C and GLS of panel data, the thesis elaborates the state-of-the-art of complementary relationship of economy and trade between Mainland and Hong Kong and the influence of CEAP on bilateral complementary relationship, including trade (entrepot trade, outsourcing trade and trade in service), investment and economic cooperation (contracted projects, labor cooperation and design consultation). Deep regional economic integration and strong correlation between business cycles of Mainland and Hong Kong are the two main reasons that explain the state-of-the-art of complementary relationship. In the part of influence of CEAP, the thesis discusses the specific influence of CEAP on thirteen kinds of trade in service between Mainland and Hong Kong such as law service and real estates service, and makes suggestions and strategies on how to improve CEPA. In the conclusion the complementary relationship of economy and trade between Mainland and Hong Kong are divided into three patterns: division complementarity, virtuous competitiveness complementarity and integration complementarity. The three patterns reveal the essential character of complementary relationship between Mainland and Hong Kong at various periods. In division complementarity, enterprises in Mainland learnt ideas and operations from enterprises in Hong Kong by "learning curve"; in virtuous competitiveness complementarity, both enterprises/industries in Mainland and in Hong Kong improve efficiency by pressure- dynamics; in integration complementarity, CEPA lowers the mobility friction of factors(transaction cost) as the system guarantee and extends the space of complementary benefits.