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Foreign direct investment and China's bilateral intra-industry trade with Japan and the US

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  • Xing, Yuqing

Abstract

This paper analyzes dynamic changes of China's intra-industry trade with its major trading partners, Japan and the US, from 1980 to 2004. It also investigates to what extent foreign direct investment promoted intra-industry trade. The empirical results show that, while shares of China's intra-industry trade with both Japan and U.S rose substantially, its intra-industry trade with Japan has reached 35 per cent of the overall trade, considerably larger than 10 per cent with the US. Sino-Japan intra-industry trade concentrated in the electrical and machinery sectors accounted for 52 per cent and 46 per cent of overall trade respectively. On the other hand, it is in the chemical and food sectors where intra-industry trade represented a relatively large proportion of Sino-US trade, 50 per cent and 30 per cent accordingly in each sector. In addition, the analysis indicates that Japanese direct investment in China performed a significant role in enhancing intra-industry trade between Japan and China. However, it found no evidence that the US direct investment in China contributed to the growth of the bilateral intra-industry trade between the two countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 18 (2007)
Issue (Month): 4 (August)
Pages: 685-700

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Handle: RePEc:eee:asieco:v:18:y:2007:i:4:p:685-700

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  1. Yuqing Xing & Guanghua Wan, 2006. "Exchange Rates and Competition for FDI in Asia," The World Economy, Wiley Blackwell, vol. 29(4), pages 419-434, 04.
  2. Balassa, Bela, 1986. "Intra-Industry specialization : A cross-country analysis," European Economic Review, Elsevier, vol. 30(1), pages 27-42, February.
  3. Nicolas R. Blancher & Thomas Rumbaugh, 2004. "China: International Trade and WTO Accession," IMF Working Papers 04/36, International Monetary Fund.
  4. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
  5. repec:rus:hseeco:121607 is not listed on IDEAS
  6. Pol Antràs, 2003. "Firms, Contracts, and Trade Structure," NBER Working Papers 9740, National Bureau of Economic Research, Inc.
  7. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  8. Lisbeth Hellvin, 1996. "Vertical Intra-Industry Trade Between China and OECD Countries," OECD Development Centre Working Papers 114, OECD Publishing.
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Cited by:
  1. Lim, Sokchea & Khun, Channary, 2010. "U.S. Bilateral Trade Deficits with China and Japan: The Role of Japanese Direct Investment," MPRA Paper 30740, University Library of Munich, Germany.
  2. Clark, Don P., 2011. "Factor adjustment implications of a free trade agreement between the United States and Thailand," Journal of Asian Economics, Elsevier, vol. 22(3), pages 213-221, June.
  3. Sawyer, William C. & Sprinkle, Richard L. & Tochkov, Kiril, 2010. "Patterns and determinants of intra-industry trade in Asia," Journal of Asian Economics, Elsevier, vol. 21(5), pages 485-493, October.
  4. Pomfret, Richard & Sourdin, Patricia, 2009. "Have Asian trade agreements reduced trade costs?," Journal of Asian Economics, Elsevier, vol. 20(3), pages 255-268, May.
  5. Dean, Judith M. & Lovely, Mary E. & Mora, Jesse, 2009. "Decomposing China-Japan-U.S. trade: Vertical specialization, ownership, and organizational form," Journal of Asian Economics, Elsevier, vol. 20(6), pages 596-610, November.
  6. Greaney, Theresa M. & Li, Yao, 2009. "Assessing foreign direct investment relationships between China, Japan, and the United States," Journal of Asian Economics, Elsevier, vol. 20(6), pages 611-625, November.
  7. Richard Pomfret, 2009. "Regionalism in the Asia-Pacific Region: How Wide, How Deep?," School of Economics Working Papers 2009-31, University of Adelaide, School of Economics.

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