AN ANALYSIS OF THE TRENDS AND DETERMINANTS OF INTRA-INDUSTRY TRADE BETWEEN CHINA AND ASIA-PACIFIC ECONOMIC COOPERATION MEMBER COUNTRIES

Abstract

This study examines the intra-industry trade relationship that China has with its 20 Asia-Pacific Economic Cooperation partners during the 2000–2014 period. By providing both a developing and developed country focus this research examines both the trends and determinants of these trade relationships from inter-industry trade, vertical inter-industry trade, horizontal inter-industry trade, and inter-industry perspectives. This study found that China’s highest levels of inter-industry trade are with Japan, Korea, and Taiwan and that these relationships have been trending upwards from both horizontal inter-industry trade and vertical inter-industry trade perspectives since 2000. While our empirical assessment using country- and industry-specific variables showed that tariff rates, market size, and factor endowments play an important role within the make-up of inter-industry trade. Finally, from a policy perspective, our study highlights the need for China to not only push forward with its Regional Comprehensive Economic Partnership trade negotiations, but also branch out by gaining additional support from other Asia-Pacific Economic Cooperation partners so as to further enhance its role in the region.