The Impact Of Intra-product Specialization On Chinese Trade Imbalance

In recent years, two interrelated important phenomena have occurred that transformed the fundamental nature of global trade. The first phenomenon is the international fragmentation of production, the second one is the explosive growth of Chinese trade and its trade imbalances.Intra-product specialization is a hot topic in academic circles in recent years. From the initial concept definition, case studies, to the role of factors in the present related mathematical model, research in this area has been increasingly improved. China started the research relatively a little late, but in the past two years the literature occurred in large numbers, indicating that the intra-product specialization has some theoretical and practical significance in China.This paper described the development with intra-product specialization and its relations with imbalance from different point of view, which combined case study, theoretical analysis with empirical analysis. I adopted the method of vertical specialization which Hummels ever used to calculate the VS ratio of China from the year 1984 to 2009, then I analyze the role of VS ratio in Chinese trade imbalance from the perspective of trade surplus, combined with other independent variable. Empirical results show that Intra-product specialization has played important roles in Chinese trade surplus, while the GDP, wages, FDI also are important factors in Chinese trade imbalance. In the conclusion, I presented some foreign trade strategies, stressed the need to optimize the structure of export products by Intra-product specialization to accelerate industrial upgrading. I also indicated the importance to change the traditional mode of economic growth based on the rational use of foreign capital while pursuing strategic trade policies.