The Discussion On The Feasibility And Orientation Of Processing Trade Development In Western China

The processing trade in our country begins during the period of reform and open of our country. In the 1980s it developed at full speed. In 2003 the processing trade in our country breakthrough 4000 hundred million dollars. In 2004 the volume of export is 3280 hundred million dollars and the volume of import is 2217 hundred million dollars. The processing trade breakthrough 5497.3 hundred million dollars which is 330 times of 1980's. It becomes the main source of China's favorable balance of trade now. In 2005 the proportion of processing trade in the total international trade is 49% and volume of favorable balance of trade is 1425 hundred million dollars. In 2006 this number changed to 48.6% and 8319 hundred million dollars. Along with the Western Development and the upgrade of the industrial structure in the east, the processing trade begins to move from the east to the western greatly.The main research task of this paper is to analyze and investigate the feasibility and model choice for the western regions from theory and empirical study. On the basis of analyzing the presentation of processing trade in western regions, this paper reaches a conclusion that the western area can develop processing trade. When analyzing the choice of the mode we have different views from"the labor-intensive industry shifts from east to western regions". By discussing the comparative advantage theory we reach the conclusion that this theory can not be used as guidelines to develop processing trade for western regions. Developing labor-intensive processing trade industry in western regions will greatly damage workers' welfare level while obtaining the little small profits. So the western region can not choose labor-intensive processing trade especially labor-intensive industry of the low level.This paper regards mastered theories as guidelines and thinks the western can be developed with a high level of strategy other than following the theory of gradient development. This is a great dissimilarity from other papers.The first part of the article is to the relevant concepts and literature on processing trade. These include the definitions of processing trade from different angles, the differences and links between the processing trade and general trade as well as trade within the industry. The last chapter of this part is the brief and concise survey of domestic and international relevant literature. This part is a foreshadowing and definition of rudimentary knowledge used in the following.After the first part we summary the presentation, characteristics and the problems of processing trade in our country. Because of the limitations of the length of the article and so on, the author only concentrates on the parts which are relevant. The processing trade can be divided into 4 stages: processing of investor's raw materials stage (from the beginning of the period of reform and open to the outside world to middle period of 1980s), Charging processing stage (from the later period of 1980s to the former period of 1990s), leading of foreign capitals of processing trade stage, upgrading of processing trade stage. At last we conclude that developing processing trade is necessary to solve the problems such as improving employment, maintaining the international balance between revenue and expenditure of our country and so on. At last we put forward the topic of developing the processing in the western regions.In the third part we begin to discuss the main problem that the feasibility to develop processing trade in western region. At beginning, we analyze the current situation, characteristic and existing subject problem of processing trade development of the western regions. At last we conclude that though the processing trade in western regions developed greatly, the portion it contributing is low and the enterprises there have great distance form the average level for many reasons. This distance gives the chance to make great development in processing trade in the western regions.We go on to discuss the advantages in developing the processing trade in western region by analyzing the theory and realistic foundation. We use dynamic comparative advantage theory, processing trade and international division theory, static and dynamic interests of processing trade and the influence economic growth mechanism in order to find out the theoretical foundation. We also accord to the real data to analyze the problems and conclude the internal that includes eastern industry upgrading, east workforce comparative advantage drop, international encouragement policies that slope, beg westwards of idle fund favorable and external condition that includes broad market potential, abundant resource, development market potential, setting-up of CEPA of surrounding countries.According to the analysis above, we conclude that theoretical foundation and realistic foundation for developing processing trade in western regions are subsistent. Western regions develop processing trade will help it win static interests and dynamic interests by the trade brought and help the western region to fully utilize its existing superior resources, drive the upgrading of the industrial structure and relieve the severe pressure on employment. Because of the special geographical position the western regions located, inequality of distribution of benefit, deficiency of the demand structure and the ability will make disadvantages which will be improved by the policy and the development of economy. Only if we make use of the advantages and avoid the disadvantages could the processing trade develop greatly in western regions.In the last part we discuss the mode for developing the processing trade in western regions. We don't deny that low-priced workforce and abundant resources are the advantages in developing processing trade in western regions. But it couldn't be used as guidelines for a long run. It means that the traditional comparative advantage theory couldn't be used as the long guidelines for the western regions to develop processing trade. According to the discussion on the traditional comparative advantage theory and the realistic foundation, we conclude that as the limitation of comparative advantage theory and the disadvantages of western it couldn't be used as the guidelines for the western regions in developing processing trade. The western regions can not choose its labor-intensive processing trade just like the development model of the eastern area. The situation of development in science and technology now in the western region is good, the development of processing trade should proceed with a higher level, and those industries of great added value of substitutability with characteristic of western should be developed.