The Evolution Of The Characteristic Of China's Intra-Industry Trade With Other East Asian Countries

The Great development of economic globalization has largely promoted the intra-regional trade in East Asia. The rapid development of intra-regional trade in East Asia means that the degree of interdependence among East Asian economies has been deepening, which is helpful for the realization of regional economic integration in East Asia. The status of intra-industry trade in East Asia is rising all the time, which is an important factor to lead tremendous growth of trade in East Asia. The share of inter-industry trade in total trade has declined, although it is still the main type of trade in East Asia. The great development of intra-industry trade in East Asia is mainly due to the large-scale trade in manufactured goods and parts. As the extent of international fragmentation deepened, the production processes were dispersed to several countries so that to form a vertical trade chain. Every country on this chain manufactured one part of the final production, which is called vertical specialization. Recently, the growth of East Asian's intra-regional trade in manufacturing parts and components is faster than the overall trade, which makes higher interdependence among East Asian economies than North America or European countries. Therefore, international fragmentation has enforced the dependence within East Asia, which will promote the regional economic integration.The intra-industry trade between China which is a trading power in East Asia and other East Asian countries will make huge impacts on the whole intra-regional trade. In this article, we are aiming at confirming the current situation of intra-industry trade between China and the other East Asian countries and then make a further explore on the final and parts and components trade under the great development of the production-sharing networks in East Asia. After that, there comes to a trade structure index which can easily tell the optimization and upgrading of China's trade structure. Finally, we do the empirical research to test related factors which significantly affect China's trade structure index.This article is divided into five sections.Section one is the introduction. It mainly describes the background and the significance of this article. And then there are some important summary of the theory of intra-industry trade. Last, it comes to the structure of this article and proposes the innovation and deficiencies.Section two provides a brief review of the relevant literature and the theoretical basis of this study. On the one hand, it highlights the emergence and development of international fragmentation. On the other hand, it reviews the parts and components trade in East Asia, including theoretical and empirical research. The theoretical research is divided into three parts, the traditional theory of international trade, new trade theory and new-new trade theory.Section three describes the current situation of parts and components trade between China and the other East Asian countries. First of all, it investigated the overall situation of parts and components trade between China and the other East Asian countries. Secondly, based on the calculation of GL index, it investigated the situation of final goods and parts under different technology levels. Finally, we obtained the modified GL index which described the optimization and upgrading of China's trade structure.Section four provides the empirical study. According to trade gravity model and the new trade theory, the difference in GDP per capita, FDI inflows of China, the export of high-tech products, the differences in facilities, tariff, geographical distance, cultural differences, and the impact dummy variable, the common border dummy variable are introduced into the model as the explanatory variables. The panel data model includes fixed effect model, two-way fixed effect model and random effects model with instrumental variables estimation. Section five gives the conclusion of this article. Difference in GDP per capita has a negative impact on the index; FDI inflows play a key role in the development of the parts and components trade; The increase in exports of high-tech products promotes China to upgrade the trade structure within the industry; Tariff reduction can lower the trade barriers which accelerates the trade integration; Crisis promotes the upgrading of industrial structure; Geographical distance has a negative impact; Cultural differences and the consumption caused by it will promote the development of vertical intra-industry trade. The impact of common border dummy variable and difference of contact cost has some uncertainty, which needs further investigation and verification.