China’s integration in East Asia: the role of intra-industry trade

Abstract

China’s intra-industry trade (IIT) with East Asia was minimal during the early years of opening up from 1978 to 1993 but increased relative to inter-industry trade in the post-1993 years. Bilateral intra-industry trade (BIIT) with Japan and Korea was sustained in capital-intensive heavy industries such as metals and yarns; its BIIT with East Asian countries also increased tremendously starting 1993 in industries characterized by production networks. BIIT with the more developed partners has increasingly become more important through higher volume and higher shares of trade in a growing number of industries. While this is also true for its trade with ASEAN 4, IIT is less both in absolute and relative terms. The overall trend shows that China’s integration to East Asia has not only increased but also deepened. China’s IIT should be analysed in the context of its historical legacy from the planned period and the continued dominance of the central government in key strategic industries.

Classification-JEL: F14, F15