An Analysis Of The Imbalance Between Sino-East Asia Trade

Sine the reform and opening up, china's capacity of exports continues to be enhanced at an unprecedented pace. Sine 1994, china's foreign trade has maintained a sustained surplus. But at the same time, trade imbalance is gradually reflected mainly in two aspects: on the one hand, China continues large trade surpluses to the U.S. and Europe (mainly the United States). On the other hand, China has huge persisted trade deficit with East Asia.In response to this phenomenon, most scholars believe that vertical specialization between China and East Asia leads to China's trade surplus with the United States. So that, is the vertical specialization also the main reason causing China's trade deficit with the United States? Theorists have been constantly discussed the trade deficit between China and East Asia, including the exchange rate, foreign direct investment, and so on. The RMB exchange rate is the focus of the discussion, and it is used in trade balance model to reflect the influence. But it lacks the consideration of the peculiarity that is the vertical specialization between China and East Asia. Although some scholars have also proposed that the trade deficit is caused by vertical specialization, it was limited to comparative analysis of the data. So this paper wants to use Rose (1989) model to analysis the imbalance based on broad economic catalogue (BEC) classification of intermediate products.East Asia in this paper includes Japan, Korea, and ASEAN. This paper using large amounts of data, charts and statistics on trade between China and East Asia analyzes the current situation. First, this paper analyzes the bilateral trade between Sino-Japan, Sino-Korea and Sino-ASEAN, and then analyzes the primary products, intermediate products, and final products, and especially analyzes the intermediate products. In empirical research, this paper, based on the hypothesis and the data from 1998-2009, uses the Rose (1989) model increasing foreign direct investment variable and intermediate products variable to analyze the panel data of six countries which has trade surplus with China, and it certifies the hypothesis:vertical specialization (import of intermediate goods) causes the trade deficit between China and East Asia.China and East Asia's trade imbalances are the inevitable result of economic globalization. China should actively implement the strategy of independent innovation and enhance China's status of vertical specialization in East Asia. Meanwhile, China should promote the strengthening of regional cooperation to reduce outside dependence of the final product. This allows the Chinese government to understand more clearly about the vertical position in the entire East Asian region, and to clearly see the trade deficit relation to vertical specialization, and to be more confident to press ahead to optimize and upgrade the industrial structure by the period of economic transformation to reverse the position of China in the vertical specialization. Therefore we can not only reduce the trade deficit with East Asia, but also to a certain extent decrease the trade surplus with the United States to greatly improve the trade balance.