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

  • Gordon H. Hanson
  • Robert C. Feenstra

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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Publication status: published as Robert C. Feenstra & Gordon H. Hanson, 2004. "Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 13(1), pages 3-35, 03.
Handle: RePEc:nbr:nberwo:8088
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  1. Robert C. Feenstra, 1998. "Integration of Trade and Disintegration of Production in the Global Economy," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 31-50, Fall.
  2. Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
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  10. Wan, Henry Y, Jr & Weisman, Jason, 1999. "Hong Kong: The Fragile Economy of Middlemen," Review of International Economics, Wiley Blackwell, vol. 7(3), pages 410-30, August.
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