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

  • Xing, Yuqing

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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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. Xiaoling Hu & Yue Ma, 1999. "International intra-industry trade of China," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 82-101, March.
  2. Antras, Pol, 2003. "Firms, Contracts, and Trade Structure," Scholarly Articles 3196328, Harvard University Department of Economics.
  3. Nicolas R. Blancher & Thomas Rumbaugh, 2004. "China; International Trade and WTO Accession," IMF Working Papers 04/36, International Monetary Fund.
  4. Balassa, Bela, 1986. "Intra-Industry specialization : A cross-country analysis," European Economic Review, Elsevier, vol. 30(1), pages 27-42, February.
  5. Michael Thorpe & Zhaoyang Zhang, 2005. "Study of the Measurement and Determinants of Intra-industry Trade in East Asia ," Asian Economic Journal, East Asian Economic Association, vol. 19(2), pages 231-247, 06.
  6. 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.
  7. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
  8. Lisbeth Hellvin, 1996. "Vertical Intra-Industry Trade Between China and OECD Countries," OECD Development Centre Working Papers 114, OECD Publishing.
  9. Don Clark, 1993. "Recent evidence on determinants of intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(2), pages 332-344, June.
  10. repec:rus:hseeco:121607 is not listed on IDEAS
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