An Empirical Analysis Of The Automotive Industry Intra-Industry Trade Between China And Eu

From the 1960s, following the world's economic development, the traditional international trade theories cannot fully explain anymore the occurrence of international trade. Economists have also found through empirical studies that a big share of international trade is now between countries with similar factors endowment and import and export of the same products occur. Verdoon (1960), Linder (1961), Posner (1961) began to study this new situation in international trade, referring as intra-industry trade. Nowadays intra-industry trade occupies a significant position in international trade and the co-existence of intra-industry trade and inter-industry trade has become a characteristic of today's economies.In this paper intra industry trade between China and the EU-15 countries in the period 2000-2010 is analyzed. This paper studies the factors influencing the automotive industry intra industry trade between China and Europe through theoretical and empirical methods. The choice to analyze China and Europe automotive industry comes from the fact that after China joined the World Trade Organization (WTO), many companies wanted to internationalize, the automotive industry also began opening up and become a pillar in the Chinese economy, furthermore auto trade also gained a predominant position in China's foreign trade. At the same time Europe is a leader in the global vehicle production with 25% of the world production, is an important economic entity in the automotive industry and is also China's important trading partner, with established economic relations, both countries have nowadays developed automotive industries.In 2010 China became the world's largest car producer and surpassed the United States as the world's largest auto market, the annual total production was 18.26 million vehicles, up 32.4%, far more than the United States, Japan and the EU; car sales reached 18.06 million, an increase of 32.4%. Car trade between China and EU also experienced a rapid development in these ten years, from 790 million Euros in 2000 it raised to 17.82 billion Euros in 2010, an increase of about 22 times. Although the domestic market and international trade have been experiencing a rapid progress, according to customs statistics, even if in 2010 China's auto output reached 18.26 million, only 544,900 were exported, accounting for only 2.98% of total production, this proportion is the lowest level among the world's major car producing countries. In-depth analysis on the factors affecting China-EU automobile industry intra industry trade is effected through a multiple regression model. The results show that the average size of the market, foreign investments, the size of the auto market, the level of per capita GDP and per capita income differences influence China-EU intra industry trade. China's economic growth will inevitably bring some changes in the market structure, narrowing the distance between China and developed countries, thus boosting the growth of intra-industry trade.The study shows that despite the rapid development of China's automobile industry, the growth of intra-industry trade is still relatively slow and the overall trend is not stable yet.