A Stochastic Frontier Analysis of Trade Efficiency for the Sino-Korea Trade

Abstract

Purpose – This paper intends to make theoretical analysis and empirical test on the factors influencing China s export to South Korea, and draw conclusions about China s export efficiency and trade potential. Based on the conclusions, the reasons for China s trade deficit with South Korea are found, and a solution is put forward for solving the problem of China s trade deficit with South Korea. Design/methodology – Based on the data of 2004-2017 years in China, this paper uses the stochastic frontier gravity model to analyze the influencing factors of China s export to South Korea, as well as the export efficiency of each province and the export potential that can be explored. Findings – First, in terms of the factors affecting China s export trade to South Korea, the GDP of the provinces and cities in China, the FDI of South Korea to the provinces and cities in China, the GDP of South Korea, the population and education level of provinces and cities in China can significantly promote the export scale of Chinese provinces and cities to South Korea. The distance between Chinese provincial capitals and the South Korean capital significantly hinders Chinese exports to South Korea; Second, in terms of export trade efficiency, the trade exchange rate of the economically developed cities along the eastern coast of China and several provinces that are close to South Korea is higher than that of the cities in the central and western regions; Third, economic globalization makes trade more convenient, the average export trade efficiency of China s exports to South Korea showed an upward trend. However, under the influence of the 2008 global financial crisis, the export trade efficiency declined from 2008 to 2009, indicating that the impact of the financial crisis on the trade efficiency cannot be ignored. Originality/value – This paper finds out the influencing factors of China s export to South Korea, analyzes the export efficiency of different provinces and cities, excavates the export potential, and puts forward some suggestions for the balanced development of China and South Korea trade in the next step.