The Impacts Of Domestic Market Segmentation On Export Trade

Domestic market segmentation is a phenomenon associated with the process of China’s transition from a planned economy to a market economy, leaving a profound impact on the national economic development. China has been developing domestic and foreign trade at the same time, keeping two markets synchronized. The starting point of this article is to find whether the domestic market segmentation will affect the export trade.Based on the existing research results, this paper builds an empirical model to study the relationship between market segmentation and export. We calculates China’s domestic market segmentation index, and finds the degree of market segmentation is on the decline. Empirical parts use the provincial panel data of China’s industrial products during 2000-2012, the main conclusions are as follows:Firstly, a U-shaped nonlinear relationship is existed between the domestic market segmentation and the export trade. When in a low degree, domestic market segmentation hinders export increase. While in a high degree, market segmentation promotes export trade increase. For the further, we found that at least 93.7% of the observation points are in the left side of the U-shaped curve, the area which market segmentation hinders the expansion of China’s export. Along with continued market integration, this hindering effect of market segmentation on China’s exports will be more obvious. Secondly, domestic market segmentation have different influences on the enterprises related to different ownership, market segmentation significantly affects the export of state-owned enterprises, but private enterprises and foreign enterprises are not significantly affected. Thirdly, for the control variables, capital intensive degree has a positive effect on export trade but not obvious, domestic market capacity, industry openness, development status and business environment have significant impacts on export trade.In this paper, empirical analysis shows that the market segmentation can drive the export growth under certain condition, which means the degree of market segmentation is very serious. But in fact, China’s current and long-term development trend indicates the domestic market segmentation degree is gradually declining, so this condition is not established. For the perspective of promoting export and economic sustainable development, to solve the segmentation problem and promote domestic market integration is very imperative. At last, this paper provides suggests: clear government functions, co-ordinate the regional economy development and promote the SOE reform.