The Impact Of Foreign Trade On China's Manufacturing Industrial Agglomeration

Ever since the rise of new economic geography school in the 1990th, the impactof trade liberalization on the industrial spatial distribution in a country has become anew research field of theory and practice. China's economy has undergone enormouschanges since the Reform and Openning-up. On the one hand, with the gradualintegration into the global economy, China has developed foreign trade and foreigninvestment and attracted foreign capital rapidly; on the other hand, the domesticindustry distribution pattern has changed constantly while industries show a quiteobvious tendency of agglomeration. At present, being highly dependent on foreigntrade and still being in development stage of industrialization are the main features ofthe Chinese economy. It is of great reference value for China's trade policy andregional policy adjustment to clarify the impact of foreign trade on China'smanufacturing industrial agglomeration.Although it has been largely confirmed by the literature that China's opening upto the outside world promoted domestic industrial agglomeration, few research focusedon the impact of foreign trade on China's manufacturing industrial agglomeration.Starting from the actual need, this dissertation explored the theoretical mechanismthrough which foreign trade affected China's manufacturing industrial agglomeration,and made empirical analyses on the way of how foreign trade promoted China'smanufacturing industrial agglomeration. Based on these, related policy suggestionswere put forward.Firstly, the dissertation hackled the basic theory and related literature ofinternational trade and industrial agglomeration. On the basis of preliminary discussionof the theoretical relationship of the two, the dissertation brought forward themechanism through which foreign trade affected China's industrial agglomeration.Foreign trade promoted industrial agglomeration through the effects of marketexpansion, technology spillover, factor accumulation, trade costs, vertical linkage and institutional change, transmitting globalization factors into local economy. At the sametime, industrial agglomeration promoted regional foreign trade through agglomerativeeconomies effect, trade selection effect and home market effect. Foreign trade andindustrial agglomeration interact and influence each other, and formed a cumulativecausation cycle. In the range that centripetal force of agglomeration was dominant,once the role of the channel was opened up, they would form a virtuous circle.Therefore, there were self-reinforcing characteristics in the promotion mechanism.Secondly, the dissertation systematically reviewed the distribution and structuralcharacteristics of manufacturing industrial foreign trade, and the agglomeration level,dynamic changes and specification of manufacturing industries in China. Thedissertation discussed the correlation of foreign trade and manufacturing industrialagglomeration, and then constructed econometric models from perspectives ofmacroscopic and relating international fragmentation of production respectively, toempirical test the impact of foreign trade on China's manufacturing industrialagglomeration.Since the Reform and Opening-up, China's foreign trade had developed gradually,evolving into global production-sharing system increasingly. From the time trend,foreign trade and manufacturing industrial agglomeration reflected the synchronization.The upgrade period of manufacturing industrial agglomeration and regionalspecialization, was usually the accelerated development period of foreign trade. In theregional distribution, China's foreign trade and manufacturing industrial agglomerationappeared the similarity. Manufacturing foreign trade presented stepladder feature ofeast-high and west-low. Eastern coastal areas had been dominated by absoluteadvantage. Although central and western regions had enhanced the share in recentyears, the backward situation could not be changed. China's manufacturing industryagglomeration phenomenon was relatively prominent. Consistent with the regionaldistribution of foreign trade, it showed a center-periphery pattern which was the easthigh but west low. The eastern region revealed a higher concentration and itsstrengthen trend in the long run. From the industrial level, China's foreign trade andmanufacturing industrial agglomeration showed isomorphism preliminarily, that theagglomeration level of export-intensive industries higher than the overall average levelof manufacturing. In the trade method, China's manufacturing industry, participated ininternational fragmentation of production mainly through the way of processing trade. The degree of international fragmentation of production showed a positive correlationwith the level of industrial agglomeration.In the evidence analysis of foreign trade and manufacturing industrialagglomeration, the dissertation proposed related hypotheses based on traditional tradetheory, Marshall's externality ideology, new trade theory and new economic geographytheory, and then established an econometric model considering many interactionvariables of country characteristics and industry characteristics, including the data offour typical year from 1985 to 2008 and almost all footloose two-digit manufacturingindustries, by quantitative analysis regard to vertical timeline and horizontal comparedsubgroups of different industries. According to the results, the interaction of foreigntrade and geographical advantage played a deterministic positive role in China'smanufacturing industrial agglomeration. Driven by foreign markets, industries withhigh export trade intensity tended to cluster in the eastern coastal provinces where thecosts of foreign trade were low. Moreover, the effect reflected in the labor and resourceintensive industries was more significant. In addition, the promoting impact of foreigntrade on China's manufacturing was significant in the export trade, but smaller for theimport trade.In the framework of international fragmentation of production, the dissertationfurther verified the influence of foreign trade on China's manufacturing. According tothe econometric analyses based on panel data of 31 provinces during 2002-2008, theregion made use of comparative advantages to undertake the production chain of laborintensive and general technical assembly in international vertical specialization,contributing to the overall manufacturing agglomeration. However, three major regionsof China acted differently in the promoting effect which reflected more significant ineastern region areas. According to the econometric analyses based on panel data of 27two-digit industries within the sample period between 2001 and 2008, the impact offoreign trade on China's manufacturing industrial agglomeration was driven byprocessing trade in the form of FDI led by transnational corporations and internationaloutsourcing. Industrial international fragmentation of production was an important oneof the positive factors of agglomeration.Finally, based on the theoretical and empirical analyses, the dissertation putforward suggestions for the Chinese government to make effective use of foreign tradeto promote manufacturing industrial agglomeration. First, unblock benefit expression mechanism of foreign trade to improve the level of industrial agglomeration. Second,adjust the regional distribution of industries to promote coordinated regionaldevelopment. Third, embed in new international division and prevent the value chainlocking in the low-end part.