We thank Huiran Pan, seminar participants at Fudan University and WEA International's 85th Annual Conference and the anonymous referee for helpful comments and suggestions. Xu acknowledges the financial support of a summer research grant in 2009 by the College of Business at GCSU. Fan thanks the National Social Science Foundation of China for research support (No. 11 & ZD003). The usual disclaimers apply.
China's Regional Trade and Domestic Market Integrations
Article first published online: 19 OCT 2012
© 2012 Blackwell Publishing Ltd
Review of International Economics
Volume 20, Issue 5, pages 1052–1069, November 2012
How to Cite
Xu, Z. and Fan, J. (2012), China's Regional Trade and Domestic Market Integrations. Review of International Economics, 20: 1052–1069. doi: 10.1111/roie.12013
- Issue published online: 19 OCT 2012
- Article first published online: 19 OCT 2012
The global economic crisis in 2007 forced China to move from export-led growth to promoting domestic demand. The move is significant, but the success of this new growth strategy depends critically on the level of domestic market integrations. In this paper, we use the methodology proposed by Anderson and Wincoop to examine China's domestic market integrations. We find evidence of border effects at both national and regional levels with significant regional differences, but they are smaller than some earlier studies suggest. Income growth, lower transportation costs, and higher intra-industry trade all have positive effects on China's regional trade. Among the factors affecting regional trade, a better business environment has the largest positive impact on lifting China's domestic trade between regions, especially in intermediate goods, suggesting that improving business environment should be the priority of government at all levels in China.