The Growth Decomposition And Driving Factors Of China’s Inter-provincial Trade

In recent years,the extremely complex environment both at home and abroad have continuously compressed the growth space of China’s export,and seriously weakened the role of exports in promoting China’s economic growth.In particular,the outbreak of the US-China trade war and the global epidemic of coronavirus infections have further aggravated the turbulence and unease in the international market,thus making the international environment facing China more complex and severe.Under this background,the solution of many major problems in China’s economy will depend on the scale of domestic demand and its expansion speed.The evolution law and prosperity degree of interprovincial trade,which is an important part of China’s domestic demand,directly determine the scale and expansion speed of China’s domestic demand.However,little research has focused on the growth of China’s interprovincial trade,which makes the understanding of the growth of China’s interprovincial trade in some degree is still a "black box".Therefore,based on China’s provincial input-output tables,this paper constructs a three-dimensional database covering interprovincial trade and international trade,and comprehensively uses various methods to explore the general law of China’s interprovincial trade growth during 1987 to 2012,and then puts forward some suggestions to promoting the prosperity and development of interprovincial trade.The main findings of this paper are as follows:First,China’s interprovincial outflows have obvious regional and sectoral differences.In detail,in terms of structural distribution and competitiveness,China’s interprovincial outflows and export are mainly distributed in coastal areas and industrial sectors,and the competitiveness of interprovincial outflows is stronger,while the competitiveness of export is relatively weak.In terms of trade comparative bias,coastal provinces and labour-intensive sectors have higher degree of comparative bias for exports,while inland provinces and capitalintensive sectors have a higher degree of comparative bias for interprovincial outflows.Second,the growth mode of China’s interprovincial outflows needs to be optimized.Minutely,the results based on the marginal decomposition method show that:The extensive margin has little positive contribution to the growth of the scale of interprovincial outflows,and has negative contribution to the growth of the market share of interprovincial outflows,which mean that its growth mode needs to change from the "amount type" growth to the "species type" growth.Additionaly,the extensive margin has negative contribution to the growth of the scale of export,and the average drop speed of of the market share of export is much smaller than that of the interprovincial outflows.The results based the CMS method show that:The expansion of domestic market demand scale is the dominant factor to promote the growth of China’s interprovincial outflows,but the decrease of interprovincial outflows’competitiveness and the deviation between the structure adjustment of interprovincial outflows and domestic market demand have inhibited the growth of interprovincial outflows.In addition,indirect competition between interprovincial outflowed products and imported products is the main reason for the decline of interprovincial outflows’competitiveness,and direct competition between the two is the secondary reason.Third,the division of labor in value chains and trade costs are key.drivers for the growth of China’s interprovincial trade.Concretely,in terms of the division of labour in value chains:Although the growth rate of the GVC participation was greater than that of the DVC participation for Chinese provinces and industry sectors,the DVC was always in a dominant position in terms of both the participation degree and participation mode.China’s DVC participation modes were dominated by the domestic-sale-oriented DVC and supplemented by the export-oriented DVC,and the sames as the GVC particition modes.Whats more,the promotion effect of DVCs is greater than that of GVCs in both the growth of interprovincial outflows and export,and their influence degrees have regional and sectoral differences.In terms of trade costs:On the whole,the interprovincial trade costs of Chinese provinces show a downward trend.The interprovincial trade costs of inland provinces are always higher than those of coastal provinces,and the interprovincial trade costs of labor-intensive sectors are always higher than those of capital-intensive sectors.The descent speed of interprovincial trade costs of China’s procinces and industrial sectors are all slower than that of international trade costs.Although the trade diversion effect which comes from the reduction in international trade costs has offset the trade creation effect that comes from the decrease of interprovincial trade costs,but the decrease of interprovincial trade costs still plays an important role in the growth of China’s interprovincial trade.Also the potential trade creation effect from the reduction of interprovincial trade costs are enormous.