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Abstract
Compared with its surging foreign trade, China’s domestic trade growth from 2000 to 2010 had been less encouraging. Then, what are the driving forces behind the dynamic pattern of China’s domestic trade? Using the gravity model of trade and China’s interprovincial panel data, this paper shows that the negative effect of distance-related transactions costs on interprovincial trade tends to rise from 2000 to 2010. After constructing China’s 56 ethnic groups into a single, interprovincial similarity index, I cannot find any evidence that supports the view that ethnic links should serve as a factor promoting bilateral trade. However, my estimated coefficients on 37 major ethnic groups show that both positive and negative ethnic influences on trade exist in China. Specifically, 14 ethnic groups (Lahu, Qiang, Jingpo, Tu, Mongol, Manchu, Hui, Zhuang, Dongxiang, Daur, Kirgiz, She, Maonan, and Tibetan) are found to contribute to China’s interprovincial trade, while five ethnic groups (Han, Va, Kazak, Dai, and Blang) tend to impede China’s interprovincial trade. These findings will be useful for policy-makers to reappraise which of China’s ethnic groups are playing the most (least) important roles in, and to introduce the optimal informal institutions into, the promotion of interprovincial economic cooperation in China.
Highlights
Compared with its surging foreign trade, China’s domestic trade growth from 2000 to 2010 had been less encouraging
The above phenomenon is unusual, especially after the following facts are taken into account: (i) Since the 1990s, there has been a significant improvement of transport infrastructures in China (ii)Since 1999, the “Western Regional Development Policy” has been implemented by the Chinese central government in order to speed up the development of the western and central provinces by encouraging the economic cooperation between the East-West provinces (iii)Since 2008, and as a result of the global reductions in trade, which resulted from the US financial crisis, the Chinese government has made various efforts in order to stimulate China’s domestic consumption
The gravity models constructed in “Methods” section can be tested by using the data described in “The data” section
Summary
Compared with its surging foreign trade, China’s domestic trade growth from 2000 to 2010 had been less encouraging. Promoted by its entry into the World Trade Organization (WTO) on December 11, 2001, China’s economic growth has significantly driven by its remarkable performance in foreign trade. In 2000, for example, China was the seventh leading exporter and eighth largest importer of merchandise trade. Notwithstanding the global reductions in trade, which resulted from the US financial crisis in 2008, China replaced Germany as the world’s largest exporting nation in 2009. In 2010, China continued to be the leading merchandise exporter (US$1.58 trillion, or 10.4 % of world exports), followed by the USA (8.4 % of world exports), Germany (8.3 % of world exports), and Japan (5.1 % of world exports).
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