Domestic Structure And Regional Trade Structure

In 1868, Japan opened Kobe as a trading port and Chinese merchants originally in Nagasaki moved to Kobe to take the trading business. They bought European goods and Chinese goods from Shanghai, as Shanghai was the center of Asia-Europe trade,and a new network radiating ports in mainland China and Japan formed in the1970 s,called as the "Shanghai network". In the end of the 19 th century Shanghai network continued active though Chinese goods lost their markets and Chinese businessman lost control in Chinese treaty ports. How to explain the different status of China in the goods market and trading network?The corresponding research question in theory is that if a nation state, does not meet the conditions of the internal structure, could simple principle of sovereignty ensure power the only principle of the structure of international system. As presented in this paper there are two explanations of the multinational trade network. The first is based on economies of scale and location advantages form new economic geography.Its assumption is that the domestic market should be a perfect competition market and then according to the transportation cost and scale effect international trade has developed. The second is based on consumers-producers not separated and private property rights could only refer to the right to the use. It clams Chinese kind of family trading networks(internal factor market) save contract cost in the replacement price mechanism therefore is more effective, so with other multinational companies can win in the competition. But the bilayer property right structure has a disadvantage, that under the market with double layer property institutions, it is difficult to induce happen industrialization. This could explain China’s falling behind in the industrial manufacturing.There are two key points to distinguish the two explanations. One is whether China’s domestic market is a perfect competitive market; the other is that, if not, then whether there is no perfect competition market in all levels’ markets in the whole country or there was not a unified national market in lack of enough division of labor.By examining China’s standard market structure and organization form in it, we found that China’s standard market is organized by industrial organization, and there is a similar perfect competition market outside those organizations. In the level of the national market, both the scale effect, the influence of transportation cost, and bilayer property right structure has taken its functions. Based on this, the paper developed mechanism of a domestic structure influencing regional trade structure, which is given priority to with the other explanationIn the process to reject a competing hypothesis and construct the mechanism, we can discover, China’s domestic structure has two characters: differential but not separating of politics and economy and the bilayer property right structure. While China’s domestic market structure reflects the different differentiation of the regions from traditional international trade theory, the nation-state system and new economic geography. So, the paper proposes a theory about structure of fields and regions of the state influence the same aspects of the international system. In order to accurately measure the domestic structure in which degree is endogenous, the paper explores further the cause of change of the domestic structure and gives a new definition of domestic structure and a bilayer contract theory based on completely exogenous variable-framing cost. While this theory and new domestic structure concept has more other application space.