Measuring Chinese domestic and international integration

Abstract

In this paper, we rely on a new set of provincial trade flow to analyze and compare the magnitude and evolution of Chinese provinces' engagement in domestic and international trade by computing all-inclusive indicators of trade barriers. We find that Chinese provinces' greater involvement in international trade went hand in hand with a decrease in domestic trade flow intensity between 1987 and 1997. Even if Chinese provinces still rely more on goods from the rest of China than on international imports, provincial borders matter more and more inside the country in the sense that they imply greater discontinuities in the Chinese domestic market.