Intra-industry Trade Theory And Its Practice In China

After World War Two, especially in 1960s', a series of new trends occurred due to scientific & technological development and international competition variation, one is that intra-industry trade, which means the mutual trade of same kind products between developed countries takes a large part in international trade, which is unexplainable by conventional theory. Intra-industry trade has lured economists' attentions, and became a hot issue among economists. According to David Ricardo's classic theory of Comparative Advantage and Heckscher and Bertol Ohlin's theory of Factor Endowment, because of great difference of factor endowments between developed and developing countries, mutual demand makes international trade happens between these two kinds of countries. During trade, a country should export goods of which factor content represents resource advantage. But actually, trade happens mostly among developed countries, mainly within industries including large quantity of goods with similar factor intensity. Obviously, this could not be explained and forecast by Theory of Comparative Advantage. The new phenomenon calls for a theoretical explanation. Rapid development of intra-industry trade and consequential intensification of industrial competition in the international market unavoidably caused negative influence on developing countries participating international division. In the new century, economy globalization would be more obvious, the connection between countries would be tighter, international trade would increase at a higher speed. The question that how China better boosts its international trade so as to further advance the national economy deserves priority and profound investigation on the part of the international trade media in China. We have a lot valuable materials which can explain the phenomenon and attribute, however, while most of them focus on developed countries there is a large shortage in study how developing countries expand intra-industry trade to improve their competence, especially cast snapshot on China. In view of this, This thesis explores the Intra-industry trade to provide a new thinking of developing international trade, based on domestic and foreign economists' research and connecting with China's situation. The logic structure of this thesis starts from analyzing intra-industry trade to provide the theoretical foundation of researching China's Intra-industry trade development. The paper consists of four chapters: Chapter One gives a comprehensive introduction to the issue of intra-industry trade. First, introduces the definition,the classes and the measurement of intra-industry trade; second, compares the characteristics of intra-industry trade with that of inter-industry trade; finally, presents the situation of Intra-industry trade in the international trade fields and its' development tendency. Chapter Two, that is, the context and review of theory of intra-industry trade. There are four kinds of theories of intra-industrial trade analyzed , which are Neo Heckscher-Ohlin Model, Neo-Chamberlian Model, Theory of Demand Preference Similarity and Mutual-dumping Model. The second part of this chapter is the comments on theory of intra-industry trade. Chapter Three is about the empirical study of intra-industrial trade in China. According to SITC,the thesis calculates the G-L index, and than gives the analysis of the factors which influence China's intra-industry trade. The last chapter concludes: developing intra-industry trade is the only way for China to boost its economy by means of foreign trade, it is also the must choice for tradepolicy. On the basis, as to international competitive and trade status and problems faced by China, direction and policy of developing china's intra-industry trade are proposed.