Banik, Nilanjan and Das, Khanindra Ch. (2012): The location substitution effect: does it apply for China? Forthcoming in:
Download (178kB) | Preview
The notion about China being factory of the world is changing. Factories in China are shifting their production base to neighboring Asia, primarily because of higher input costs in China, a volatile Chinese exchange rate, Chinese exports being increasingly targeted by its major trading partners, and a fall in price-competitiveness in producing in mainland China. We examine the location substitution effect for China: Chinese firms are exporting primary, intermediate and machinery items, meant for producing final output elsewhere. Results suggest Chinese firms are increasingly substituting their production base outside China.
|Item Type:||MPRA Paper|
|Original Title:||The location substitution effect: does it apply for China?|
|Keywords:||Trade, Foreign Direct Investment, China, GMS|
|Subjects:||F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade|
|Depositing User:||Nilanjan Banik|
|Date Deposited:||08. May 2012 12:25|
|Last Modified:||12. Feb 2013 11:04|
1. Amiti, M. and C. Freund (2008). The Anatomy of China’s Export Growth, World Bank Policy Research Working Paper 4628.
2. Anderson, J. E. (1979). A Theoretical Foundation for the Gravity Equation, American Economic Review, 69: 106–116.
3. Anderson, J. E. and E. van Wincoop (2004). Trade Costs, Journal of Economic Literature, 42: 691-751.
4. Ando, M. (2006). Fragmentation and Vertical Intra-industry Trade in East Asia, North American Journal of Economics and Finance, 17: 257-281.
5. Arellano, M. and S. R. Bond (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations, Review of Economic Studies, 58: 277-297.
6. Banik, N. (2011). China’s New Found Love: The GMS, Journal of World Trade, 45: 1037-1057.
7. Bergstrand, J. H. (1985). The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence, Review of Economics and Statistics, 67: 474–481.
8. Blundell, R.W. and S.R. Bond (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models, Journal of Econometrics, 87: 115–143.
9. Castellani, D., F. Serit and C. Tomasi (2010). Firms in International Trade: Importers’ and Exporters’ Heterogeneity in Italian Manufacturing Industry, The World Economy, 33: 424-457.
10. Chen, M. X. and M. O. Moore (2010). Location Decision of Heterogeneous Multinational Firms, Journal of International Economics, 80: 188-199.
11. Chit, M. M., M. Rizov and D. Willenbockel (2010). Exchange Rate Volatility and Exports: New Empirical Evidence from Emerging East Asian Economies, The World Economy, 33: 239-263.
12. Côte, A. (1994). Exchange Rate Volatility and Trade, Bank of Canada Working Paper, No. 94-5, Bank of Canada, Ottawa.
13. Deardorff, A. (1998). Determinants of Bilateral Trade: Does Gravity Work in a Neo-Classical World? J. Frankel (ed.), Regionalization of the World Economy, Chicago, University of Chicago Press.
14. Devonshire-Ellis, C. (2011). China Now Has Third Highest Labor Cost in Emerging Asia, China Briefing, January 19. Available on the web: http://www.china-briefing.com/news/2011/01/19/china-near-top-of-the-list-for-wage-overheads-in-emerging-asia.html , Accessed April 21, 2011.
15. Fukao, K., H. Ishido and K. Ito (2003). Vertical Intra-industry Trade and Foreign Direct Investment in East Asia, Journal of the Japanese and International Economics, 17: 468-506.
16. Gaulier, G., F. Lemoine and D. Unal-Kesenci (2007). China’s Emergence and the Reorganisation of Trade Flows in Asia, China Economic Review, 18: 209-243.
17. He, W. and M. A. Lyles (2008). China’s Outward Foreign Direct Investment, Business Horizons, 51: 485-491.
18. Helpman, E. (2006). Trade, FDI and Organization of Firms, Journal of Economic Literature, 44: 589-630.
19. Hummels, D., J. Ishii and K. Yi. (2001). The Nature and Growth of Vertical Specialization in World Trade, Journal of International Economics, 54: 75-96.
20. Koopman, R., Z. Wang and S. Wei (2008). How much of Chinese Exports is Really Made in China? Assessing Domestic Value Added when Processing Trade is Pervasive, NBER Working Paper No. 14109, Cambridge, MA.
21. Lall, S. (1998). Export of Manufactures by Developing Countries: Emerging Patterns of Trade and Location, Oxford Review of Economic Policy, 11: 54-73.
22. Lall, S. (2000). The Technological Structure and Performance of Developing Country Manufactured Exports, 1985-98, Oxford Development Studies, 28: 337-369.
23. Li, S. and J. He (2007). Excess Liquidity Control Requires a Multi-pronged Approach, China Economist, September, 1: 19-29.
24. Linneman, H. (1966). An Econometric Study of International Trade Flows, Amsterdam: North Holland.
25. Poyhonen, P. (1963). A Tentative Model for Volume of Trade between Countries, Welwirtschaftliches Archiv, 90: 93–99.
26. Tenreyro, S. (2007). On the Trade Impact of Nominal Exchange Rate Volatility, Journal of Development Economics, 82: 485-508.
27. Tinbergen, J. (1962). Shaping the World Economy: Suggestions for an International Economic Policy, New York: Twentieth Century Fund.
28. Yu, X. (2007). The Pattern of Exchange Rate Effects on Chinese Prices, Review of International Economics, 14: 683-699.
29. Zhang, C. (2009). Excess Liquidity, Inflation and Yuan Appreciation: What can China Learn from Recent History?, The World Economy, 32: 998-1018.