A Study On The Expansion Mechanism, Economic Effects,and Strategic Choice Of Overlapping Free Trade Zone

With the thriving economic globalization, communication in politics, economy and culture is increasingly deepened among countries. Under the circumstances that global multilateral trade system struggles nowadays, regional economic integration has become the priority option to develop foreign economy so as to promote the economic benefits of regional preference trade and minimize risks of marginalization and being colonized in the process of opening-up. In particular, free trade zone is preferred by most countries because of the limitedness in sovereignty transfer, directness in benefit obtaining and convenience in contractual agreement. It has become the fastest growing form of integration at the present stage. When the explosively growing free trade agreements (FTAs) have formed the overlapping network, the overlapping free trade zone emerged.As the rapidly rising new power, China appeared irresistible to take part in bilateral free trade in21st century and became the important force in the new movement of regional economic development around the world. By the end of2013, China participates in the global overlapping free trade zone as "Hub country" and "Spoke country". It has constituted16free trade zones with over30economy entities in five continents, including10already signed and conducted FTAs. The overall framework of overlapping free trade zone has come into being. The further development of overlapping free trade zone has already become unstoppable since multilateral trade system is stuck with difficulties. As a result, it’s of theoretical value to further study the expansion mechanism of overlapping free trade zone and analyze its benefits. At the same time, taking the fact that China has played a role in the overlapping free trade zone into consideration, thinking about the future strategic choices has extremely important effects on the acquirement of the initiative in international negotiations, the achievement of improving our open economy and even the promotion in the process of RMB’s internationalization.The paper mainly studies the overlapping free trade zone in China. First of all, it gets the clear definition of overlapping free trade zone after reviewing researches. Secondly, it analyzes the expansion mechanism and economic effects of this new regional economic cooperation organization and then draws the framework of China’s participation in this zone. Thirdly, using related economic indices and measurement models, the research conducts empirical test on the short&long-term economic effects of the overlapping free trade zone in China. Finally, based on the empirical results and recent domestic complex environment, this prospective study gives suggestions on the future development of overlapping free trade zone in China. The six main parts of the thesis are as follows.First chapter:Introduction. It mainly introduces the backgrounds of the thesis, carries out the core problem and specifies the theoretical and practical value of this research. Meanwhile it gives the clear definition of overlapping free trade zone and conclusions of the train of thought, innovation and shortages.Second chapter:Overlapping free trade zone and literature review. This chapter first introduces the contents, reasons, process and characteristics of overlapping free trade zone. And then it outlines the Rules of Origin which are the core issues in this concept. Finally, it fully teases out the domestic and foreign related researches on overlapping free trade zone to offer advice for later study.Third chapter:The expansion mechanism and economic effects analysis in overlapping free trade zone theory. This chapter theoretically investigates the expansion mechanism and economic effect. At first, based on "Domino theory", it studies the expansion mechanism from aspects of economy and politics. Secondly, it applies Cournot-competition-model to analyze its short-term economic effect. And then it inspects the long-term economic effect from aspects of investment flows, resource reallocation and overall economy efficiency. Finally it summarizes the fact that China participates in the global overlapping free trade zone.Forth chapter:The empirical test of China’s overlapping free trade zone. Based on the theories mentioned in chapter3, this paper focuses on the economic effects from China’s participation in overlapping free trade zone since2001and decides to apply indices, such as exports growth, mutual dependence index and revealed comparative advantage index, to test the trade and investment effect, industrial agglomeration and decentralization effect brought by the formation and expansion of overlapping free trade zone. Then it uses modified gravity model to examine the influences from overlapping free trade zone on different countries.Fifth chapter; The strategic choice of China’s overlapping free trade zone. On the basis of the above theories and empirical results, combing recent situations and policies at home and abroad, this thesis promotes the strategic choice and layout for future China’s participation in overlapping free trade zone from the aspect of correlation of politics and economy.Sixth chapter:Conclusion. It aims to summarize the core opinion of the overall research.Innovations in this article:1. Nowadays, there are few researches about overlapping free trade zone and even there’s only a vague definition about it. Besides overlapping free trade zone in China started late and there are few systematical researches on China’s overlapping free trade zone.2. This paper focuses on the expansion mechanism, short and long-term economic effect of overlapping free trade zone. Combining the political and economic situations at home and abroad and follows the policy orientation so as to study the strategic layout problem of China’s participation in overlapping free trade zone. As a result, it can offer some valuable advice to constitute the overlapping free trade zone of China.3. This paper applies both theoretical and empirical analysis. In the theoretical part, it applies the theoretical model in economy and the mathematical derivation method; in the empirical part, it includes not only the time series and cross-section data analysis between China and Spoke countries, but also the related measurement models. As a result, it can analysis the effects of overlapping free trade zone from all aspects.This paper draws the following conclusions after analysis:1. As the result of development of regional economic organizations, overlapping free trade zone differs from the simply superposition of traditional free trade zones. It’s a complex regional economic organization formed by different overlapping FT As.2. The formation and expansion of overlapping free trade zone has both economic and political motivations. It will lead to the uneven distribution of welfares within the zone regardless of the short and long-term. The Hub country will benefit a lot and show the tendency of professional centralization while the Spoke countries tend to decentralization.3. The effects of the recent development of China’s overlapping free trade zone have already existed. Faced with complex international surroundings, China has to push the transformation in economy, consolidate "Center" position. At the same time, China should promote the construction of overlapping free trade zone from the breakthrough of Asia-Pacific region and makes full use of the trade relations between Hong Kong, Macao and Taiwan through CEPA and ECFA.