Research On The Trade Relationship Among Mainland China,Taiwan And Hong Kong

Since the reform and opening up, trade cooperation between China mainland. Taiwan and Hong Kong are getting closer. After China mainland and Hong Kong signed CEPA, China mainland and Taiwan also signed ECFA in2010. The trade relationship between China mainland, Taiwan and Hong Kong is increasingly becoming the focus of attention. There are many researches on the trade relations of the three places, most of them are about the bilateral trade relations of the three places. However, researches related to the relationship of China mainland, Taiwan and Hong Kong are insufficient.This paper aims to study the trade relationship among China mainland, Taiwan and Hong Kong comprehensively. To explore it, this article uses the international trade theory and index analysis method to analyze the trade situation and the existing problems of the relationship under the present stage. Then it establishes a multiple linear regression model to deal with what factors affect the cross-strait trade and how. The key findings of this study are as follows:First, this research demonstrates that trade scale among the three places has expanded rapidly, but the trade imbalance is a serious problem. Taiwan has maintained a huge trade surplus to China mainland and Hong Kong for periods.Second, after accession to the WTO, the proportion of the re-exports via Hong Kong accounting for the total cross-strait trade has declined. Meanwhile. Taiwan’s trade dependence on Hong Kong also fell.Third, in terms of trade competitiveness, the mainland and Hong Kong both have a strong international competitiveness in the labor-intensive products, followed by some capital-and technology-intensive products. Taiwan show strong international competitiveness in capital and technology-intensive products followed by labor-intensive products. In terms of trade complementarity, China mainland and Hong Kong are highly complementary in the labor-intensive products. Trade complementarity in capital and technology-intensive products constantly enhanced between Taiwan and Hong Kong in recent years. Overall, the trade complementarity is stronger than trade competitiveness among these three places.Fourth, in terms of raw materials, primary products and labor-intensive products, the trade pattern of the mainland and Taiwan is intra-industry trade. Meanwhile, in terms of capital and technology intensive products, the trade pattern is inter-industry trade. China mainland and Hong Kong presents inter-industry trade in the resource-intensive and the primary products, and intra-industry trade in labor-intensive and capital-intensive products. The intra-industry trade between Hong Kong and Taiwan mainly exists in precious metal products.Fifth., the empirical test confirms the presumption that Hong Kong played an intermediary role in the long-term cross-strait trade relations. In addition, cross-strait trade relations also have co-integration relationship with GDP of China mainland and Taiwan direct investment in the China mainland. But the test shows that Taiwan direct investment in the China mainland has negative correlation to the cross-strait trade relations. The possible explanation is that substitution effect of direct investment of Taiwan in the mainland is greater than promoting effect.The novelty of this article entails three aspects. First, this paper provides a new perspective to view the relationship of China mainland, Taiwan and Hong Kong in the context of regional economic integration. Second, this research takes Hong Kong as an important factor in the impact of cross-strait trade relations and brings it into the empirical model to explore what factors influence the cross-strait trade relations. Third, the study finds that that substitution effect of direct investment of Taiwan in the mainland is greater than promoting effect. Taiwanese increasingly focused on the domestic market of the mainland.In addition, compared to the contribution of this study, this study also has a number of limitations. First, there is lacking in related references about exploring the role of Hong Kong in cross-strait trade relations. Consequently, there are some difficulties in model building and variable selection. Second, model assumption about the influence of independent variable to dependent variable is still lack of theoretical support and rigorous empirical testing.