The Research Of The Home Market Effects On China’s Mechanical And Electrical Products Trade

China is the largest mechanical and electrical products trade nation of the world, the trade of mechanical and electrical products plays a decisive role in China’s foreign trade. The home market effects(HMEs) proposed by Krugman in the framework of the new trade theory offers a new perspective for the study on the rapid development of China’s mechanical and electronic products trade.Firstly, based on reviewing related theories and literatures, this thesis makes theoretical analysis toward the generation and mechanism of HMEs, consider that there is a positive correlation between economic scale, product differentiation and HMEs, a negative correlation between transportation cost, trade barriers and HMEs. Then, this thesis makes primary analysis of HMEs shown by China’s mechanical and electrical products trade based on the development status of China’s mechanical and electrical products trade from the aspects of trade scale, trade structure, trade partners, etc. Secondly, this thesis makes use of the trade data that ranks 30 in the mechanical and electrical products trade between China and other countries or regions to build a panel gravity model in order to make empirical analysis, which indicates that the overall trade of China’s mechanical and electrical products show HMEs, electrical and electronic products shows significant local market effects; transport equipment and machinery equipment weak local market effects; metal products and instrumentation no HMEs. Finally, this thesis makes recommendation listed as follows on the trade development of China’s machinery and electronic products from the perspective of the HMEs based on the results of this thesis’ empirical analysis: the government should pay attention to the role of HMEs, preferentially develop the mechanical and electrical products with significant HMEs, speed up the gathering of mechanical and electrical industry with less significant HMEs and select targeted trade partners to establish a free trade area. Meanwhile, enterprises should actively accelerate the innovation of mechanical and electrical products and build their own brand advantage.