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Microeconomic analysis on the growth of trade volume in China: 1978–2007


  • Fuxiang Wu


  • Zhibiao Liu



The gravity equation is usually employed by researchers in the field of international trade to explain the growth of a country's imports and exports volume, especially the manufactured goods. But in China, variables in the model, such as exchange rate, tariff, transportation cost, and spatial distance etc., are not sufficient to explain the riddle of China's growth in trade volume. In fact, this growth in China's trade volume is owing to the disintegration of production in the process of economic globalization, to the multinational corporations’ (MNC) vertical outsourcing of their manufacturing processes and procedures, and to the timely readjustment of Chinese enterprises on their strategies of participating in the international intra-product specialization. In this paper we establish an equilibrium model of intra-product specialization dominated by MNCs, and do some empirical tests on the growth in trade volume in China by using the variables including technological conditions of trade, similarity of economies, policy conditions of trade, disintegration of production and level of per capita capital equipment. The empirical results support our basic judgments.
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Suggested Citation

  • Fuxiang Wu & Zhibiao Liu, 2010. "Microeconomic analysis on the growth of trade volume in China: 1978–2007," Frontiers of Economics in China, Springer;Higher Education Press, vol. 5(2), pages 299-324, June.
  • Handle: RePEc:spr:frecch:v:5:y:2010:i:2:p:299-324 DOI: 10.1007/s11459-010-0015-2

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    References listed on IDEAS

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    More about this item


    riddle of China’s growth in trade volume; microeconomic analysis; intra-product specialization; B21; P33;

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • P33 - Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid


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