The Analytic Demonstration Of The Factors That Influence The Development Of Intra-industry Trade Between China And Republic Of Korea

The pattern of foreign trade can be divided into two types, one is Inter-Industry Trade, and the other is Intra-Industry Trade. Intra-industry trade is a new pattern of internationnal trade that rose diffusely after World War Two, and it has became one of the most important trade patterns in the world which has greartly affected economic development of each country. The development of IIT has afforded an unprecedented opportunity for developing countries to join in global production network.Ⅰ.Summarization of Intra-Industry Trade Theory"Intra-industry trade"means that a country or a region imports and exports the products the same industry simultaneously.The internantionally universal measuring index of intra-industry trade is the"Intra-Industry Trade Index"which was called"G-L index"for short.According to the differentiation of the products, intra-industry trade can be divided into two types, one is the horizontal intra-industry trade, and the other is the verdict intra-industry trade. Trade in verdically differentiated products distinguished by quality and price and vertical specialisation of production that results in trade in similar goods at different stages of productions. Horizontal intra-industry trade enables countries with similar factor endowments to benefit from economies of scale by specialising in"niche"products.Intra-Industry Trade Theory is supported by three principles, which are"Differentiation of Products","Similarity of demands"and"Economies of Scale"."Differentiation of Products"makes it possible to meet the demands of consumers with various status and habits, so"Differentiation of Products"is the cause of intra-industry trade."Similarity of Demands"is in favor of the suppliers to overcome the market segregation caused by the difference of social political systems, policies and culture, which makes it convenient to enter the foreign markets. Therefore,"Similarity of Demands"is the assurance of intra-industry trade."Economies of Scale"can make the country with the ability to produce in large scale win the advantage in cost of products and get the chance to occupy foreign markets and gain profits. Consequently,"Economices of Scale"is the benefit source of intra-industry trade. There are several theories about intra-industry trade such as :Product diversity, Economies of Sacle, In Favor of wants, Overlapping needs and so on.Additionally, the factors that influence intra-industry trade:1. Gross Domestic Product on average 2. Industrial Structure 3. Scale of country4. Geographically close 5. Differentiation of Products 6. Economices of Scale 7. Foreign Direct Investment.Ⅱ. The Features and Development of Intra-Industry Trade Between China and Republic of KoreaSince China established its diplomatic relation with Republic and Korea in 1992, the two countries has begun their direct trade, after which the intra-industry trade relation between the two countries has developed very fast. During the past decade, great changes have taken place in the stucture of goods in the trade between the two countries and the proportion of trade inside the industries is constantly improved. This paper analyses the development and structural change of trade between the two countries by studying the commodity composition and calculating index and quota of trade among and within industries of these two countries. The results as follows:the Horizontal intra-industry trade among industries is quite low while that within the same industry, which represents the horizontal division of labour, is growing very fast, especially embodied in the trade of manufactured goods, as to trade within the same industry, share of trade within horizontal industries which represents the products of the same quality is greater than that within vertical industries which produces different products due to different links though within the same industry.Ⅲ. The Analytic Demonstration of the Factors That Influence the Development of Intra-industry Trade Between China and Republic of KoreaThere are several reasons that influence the development of intra-industry trade between two countries, but the main reasons are development levels of each country, economies of scale, international direct inwestment, so this paper chose these three reasons to explain the problem between China and Republic and Korea. We can get these conclusion:the development levels of two countries and Korean investment in China has become important factor of bringing about an advance in intra-industry trade between China and Republic and Korea. However, economies of scale have some hindered the intra-industry trade between China and Republic and Korea.Ⅳ. Countermeasures and Suggestion to Promote the Development of Intra-Industry Trade Between China and Republic of KoreaChina is the biggest developing country and the fourth trading individual economy of import and export in the world. The normal development of intra-industry between the two countries conform to common interests in them. For developing the intra-industry trade with Republic and Korea, we should take these mestures as follow:ⅰ.Speeding up adjusting Industrial Structure, Encouraging development of Economies of Scaleⅱ. Improving quality and competitive strength of our export products, Developing technology trade between two countries energeticallyⅲ. Drawing lessons form international corporation in Republic and Korea, improving the foreign direct investment from Republic of Korea.