Empirical Study On The Elasticity Of Substitution About Chinese Tradeable And Nontradeable Produces

With the accession to WTO, Chinese economic growth more dependent on exports, Chinese economic development more dependent on international market. But with the change in the form of international economy, U.S. financial crisis cause global economic growth slowly, trade protectionism in Europe and America, and the diversification of trade friction, these factors have seriously impact on Chinese exports. Because of the shrinking on foreign demand, Chinese economic growth can not only rely on foreign markets, but should rely on the domestic market.China has huge potential domestic market demand. In order to stimulate domestic demand and sustain economic growth, the state has invested 4 trillion funds for road, rail, airport and other major infrastructure construction, new rural construction, urban and rural housing construction, the protection of ecological environment construction and so on. Income growth of urban residents, the state take measures to further expand employment and increase wage, increasing of personal income tax threshold; the lives of rural residents has been protected, the burden on patents has been reduced, the agricultural prices has been increased appropriately by the state, so the disposable income of farmers has increased. Increased investment in infrastructure construction, the growth in income of residents, these ensure our strong domestic demand market. The increase in domestic investment demand and income growth led to the change in consumption structure, industrial investment and development of various industries has changed products demand, people increased disposable income has changed the preferences for the products.This paper analyze in the situation of shrinking about foreign markets demand, from the perspective of the elasticity of substitution to analyze if the exports can adapt to the consumer demand enter into the domestic market. This paper first analyze the product's tradability, use cross-price elasticity to estimate if there have substitute relationship between tradable sectors and non-tradable sectors, calculate the elasticity of substitution between the tradable and non-tradable products in manufactured products, and according to the situation of domestic market demand, analyze if the tradable products can substitute the non-tradable products enter into the domestic market, besides, calculate the price elasticity of tradable products to determine the products belong to flexible products or rigid products. Finally, the conclusion is there have strong substitution between agriculture, industry and service departments, tradable products and non-tradable products have strong substitute relationship in Industrial products. According to the situation of domestic market, tradable products can substitute non-tradable products into the domestic market, the tradable products which enter into the domestic market can use different pricing method according to the size of the price elasticity to increase the products trade, and for the tradable products which can not enter into domestic market, the manufacturers can improve the product quality or increase the added value of products to increase exports.