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Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods

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Author Info
Gordon H. Hanson
Robert C. Feenstra

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Abstract

In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong distributes a large fraction of China's exports. Net of customs, insurance, and freight charges, re-exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re-exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, products sent to China for further processing, and products shipped to countries which have less trade with China. These results are consistent with quality-sorting models of intermediation and with the outsourcing of production tasks from Hong Kong to China. Additional results suggest that Hong Kong traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8088.

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Date of creation: Jan 2001
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Handle: RePEc:nbr:nberwo:8088

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Find related papers by JEL classification:
F1 - International Economics - - Trade
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

References listed on IDEAS
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    Other versions:
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    Other versions:
  4. Robert C. Feenstra, . "Integration Of Trade And Disintegration Of Production In The Global Economy," Department of Economics 98-06, California Davis - Department of Economics. [Downloadable!]
    Other versions:
  5. Townsend, Robert M, 1978. "Intermediation with Costly Bilateral Exchange," Review of Economic Studies, Blackwell Publishing, vol. 45(3), pages 417-25, October. [Downloadable!] (restricted)
  6. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
  7. Robert C. Feenstra et al., 1999. "Discrepancies in International Data: An Application to China-Hong Kong Entrepot Trade," American Economic Review, American Economic Association, vol. 89(2), pages 338-343, May. [Downloadable!] (restricted)
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  13. Gary Biglaiser & James W. Friedman, 1999. "Adverse Selection with Competitive Inspection," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 8(1), pages 1-32, 03. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Deborah Swenson, 2005. "Outsourcing Price Decisions: Evidence from U.S. 9802 Imports," NBER Working Papers 11184, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Robert C. Feenstra & Gordon H. Hanson, 2004. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," NBER Working Papers 10198, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Lee Branstetter & Nicholas Lardy, 2006. "China's Embrace of Globalization," NBER Working Papers 12373, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Paganetto Luigi & Becchetti Leonardo, 2001. "Globalizzazione,Rivoluzione Tecnologica E Commercio Internazionale: Le Nuove Sfide," Departmental Working Papers 153, Tor Vergata University, CEIS. [Downloadable!]
  5. Masahiro Endoh & Koichi Hamada & Koji Shimomura, 2008. "Can a Preferential Trade Agreement Benefit Neighbor Countries without Compensating Them?," Working Papers 961, Economic Growth Center, Yale University. [Downloadable!]
  6. Sebastián Claro, 2005. "How Uncompetitive is the State-Owned Industrial Sector in China," Documentos de Trabajo 305, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  7. Philipp J. H. Schröder & Harald Trabold & Parvati Trübswetter, 2003. "Intermediation in Foreign Trade: When Do Exporters Rely on Intermediaries?," Discussion Papers of DIW Berlin 336, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  8. Fisman, Raymond & Moustakerski, Peter & Wei, Shang-Jin, 2007. "Outsourcing Tariff Evasion: A New Explanation for Entrepôt Trade," CEPR Discussion Papers 6078, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  9. Toru Kikuchi, 2008. "Footloose Capital and the Locational Advantage of a Hub," Economics Bulletin, Economics Bulletin, vol. 6(43), pages 1-9. [Downloadable!]
  10. Albert Park & Dean Yang & Xinzheng Shi & Yuan Jiang, 2006. "Exporting and Firm Performance: Chinese Exporters and the Asian Financial Crisis," Working Papers 549, Research Seminar in International Economics, University of Michigan. [Downloadable!]
    Other versions:
  11. Chad Bown & Meredith Crowley, 2004. "China's export growth and U.S. trade policy," Working Paper Series WP-04-28, Federal Reserve Bank of Chicago. [Downloadable!]
  12. Chang-Tai Hsieh & Keong T. Woo, 2005. "The Impact of Outsourcing to China on Hong Kong's Labor Market," American Economic Review, American Economic Association, vol. 95(5), pages 1673-1687, December. [Downloadable!]
  13. Hendrik P. van Dalen & Aico P. van Vuuren, 2003. "Greasing the Wheels of Trade," Tinbergen Institute Discussion Papers 03-066/1, Tinbergen Institute. [Downloadable!]
  14. Lee Branstetter, 2006. "China's Embrace of Globalisation," Working Papers id:640, esocialsciences.com. [Downloadable!]
  15. Bruce Blonigen & Alyson Ma, 2007. "Please Pass the Catch-up The Relative Performance of Chinese and Foreign Firms in Chinese Exports," NBER Working Papers 13376, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Robert C. Feenstra & Gordon H. Hanson & Songhua Lin, 2002. "The Value of Information in International Trade: Gains to Outsourcing through Hong Kong," NBER Working Papers 9328, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Horst Raff & Nicolas Schmitt, 2008. "Buyer Power in International Markets," Kiel Working Papers 1431, Kiel Institute for the World Economy. [Downloadable!]
    Other versions:
  18. Haddad, Mona, 2007. "Trade integration in East Asia : the Role of China and production networks," Policy Research Working Paper Series 4160, The World Bank. [Downloadable!]
  19. Pranab Bardhan, 2009. "Middlemen Margins and Globalization," Working Papers id:2202, esocialsciences.com. [Downloadable!]
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