On Financial Development And Dual Margin Of Manufactuirng Expotr

As an emerging economy, China export always maintains a state of growing at a high speed, but the growth efficiency of its trade scale has become an object of public denunciation. For one thing, the proportion of processing trade is too high; for another, the export growth relies too much on the excessive wastage of resources and the infinite supply of cheap labor force. However, as the China’s labor force growth slows down, we have to bid farewell to the demographic dividend. At the same time, the export depending excessively on resources is markedly limited due to the proposal of sustainable development. In recent years in particular, China export growth has showed a tendency of showing down as the appreciation of the RMB accelerates and the price of labor force and raw materials rises, together with the impact of the global financial crisis. Thus, how to enhance our trade competitiveness is a severe challenge faced by Chinese economy. What’s the new comparative advantage of China export trade? Traditional international trade theory conducts the study in the market circumstances of zero information and trade cost, i.e. studying with the assumption that there is no market friction, and ignores the influence of difference of a country’s system on the comparative advantage. In recent years, however, more and more theories and experience have showed that the diversity in different countries’system, in the condition that the technology and the factor endowment are the same, will be the source of comparative advantages due to the market frication. Such sources of comparative advantage include:the security of contract enforcement, labor market institutions and financial development.More and more documents provide evidence that financial development is an important source of a country’s comparative advantage. Sound financial system can contribute to enterprise’s technological innovation and constant cost investment into export so as to improve the export competitiveness.The Heterogeneous Firm Model (New New Trade Theory) developed recently shows that the export trade growth can be considered from two aspects, namely, intensive margin and extensive margin. The intensive margin means that the export growth of a country is mainly derived from the quantitative expansion of existing export enterprises and products along a single direction while the extensive margin indicates that the export growth of a country is achieved fundamentally on the basis of the entrance of new export businesses into the export market as well as the increase of sorts and kinds of export products. Based on the theoretical frame of the Heterogeneous Firm Model,this paper incorporates credit constraints in a heterogeneous-firm model. The model implies that the productivity cut-off for exporting will vary systematically across countries and sectors. It will be higher in financially vulnerable industries which require a lot of external finance or have few assets that can be collateralized and lower in countries with high levels of financial contractibility. Importantly, the effect of financial development will be more pronounced in financially vulnerable sectors. Credit constraints thus preclude potentially profitable firms from exporting and result in inefficiently low levels of trade participation. Credit constraints will affect both the extensive (number of firms exporting; number of export destinations) and the intensive (firm-level exports) margin of trade.In the subsequent empirical analysis, we test for an dual margin impact of finance on trade patterns based on cross-country data and china data.First,we use bilateral trade fow data for64exporting and182importing countries, and28ISIC manufacturing industries for the period1992-2009, to test the dual margin impact of finance on trade patterns by gravity model. Our results confirm that financial development has a positive influence on the probability that two countries are trade partners,and these results also hold for the value of exports between trade partners. The role of financial development is particularly significant in the high-finance-dependent and low availability of tangible assets sectors.The financial environment of the importing country improve the implementation of contract, which can facilitate the occurrence probability of trade, but improve export volume. The results remained robust after selecting IV to overcome endogenous issue.Meanwhile, the role of financial development at different times and different countries have significant differences.Second, We re-measure industry dependence on external financing afer80million pieces of Chinese manufacturing exports were classifing to the national economy industry classification.Then we use single-country gravity model to test the dual margin impact of finance and FDI on trade patterns. For the high-finance-dependent sectors, financial development maked them producting in the best state,enabling them to enter the export market, expanding the share of exports, have a positive impact on the intensive margin and extensive margin. Meanwhile, FDI can substitute bank credit to some extent, promote exports of dual marginal of high-finance-dependent sectors. In view of the feature that there is obvious regional difference in China’s financial development, we introduce a set of indicator system reflecting the relative scale, efficiency and structure of financial intermediation, define the instrumental variables properly and overcome the endogenous problem of models, make an comprehensive analysis on the dual margin impact of financial development on export growth.Based on the results of theoretical and empirical analysis,this paper puts forward some policy suggeetions.Meanwhile, this paper presents the imperfections and the direction of further research.