A Dynamic Computable General Equilibrium Analysis On The Trade Liberalization Of Electronic Industry Between China And Korea

Based on the rapid development of Sina-Korea trade and economic relations, the electronic information industry has become a focus in the bilateral commerce relationship. The electronic information industry, which is the foundational and backbone industry, is not only the power of the bilateral trade, but also the main force of the economic development between the two countries. In comparison, the Korea gains the advantage of this industry while the competitiveness of the electronic products, which are made by China, is still growing gradually. Owing to the technological innovation of China in recent years, under the circumstance of the trade liberalization, the prospects of the bilateral open effect on China remain undecided.Against this background, this paper first analyses the trade structure of the two nations in the electronic information industry by measuring both countries'trade competitive power, complementarities, Technology Sophistication of export trade and the inter-industry trade. Empirical results show that the competitiveness of the electronic products, which are made by China, is growing gradually. And some products even excelled the congeneric Korea commodities. In general, the connection between the two nations is still the bidirectional complementary, especially the China's high dependency on import of the semiconductor transistor and the electronic devices and components from Korea. Combining with the situations nowadays, the technological gap between China and Korea is shrinking while the amount of the inter-industry trade is soaring. Therefore, the two countries could obtain huge mutual benefit from the cooperation in the near future.Whereafter, using the extended MCHUGE model, the following paper simulates the influence on the macroeconomic situation for the next 10 years of China of the free trade in goods and the investment liberalization in the electronic information industry between China and Korea. And then, taking the industrial feature into consideration, the article has introduced several imperfect competition factors into the MCHUGE model, such as the scale economy, the monopoly and the product diversification, and simulated the effects on China of the bilateral trade liberalization from a new perspective.The results show that, the advantage impacts of the trade liberalization of electronic products between China and Korea on China outweigh the disadvantages, which would preserve steady GDP growth and be beneficial to the upgrade of domestic industrial structure. The bilateral trade liberalization brought about increases in investment and exports, which will directly lead to a substantial increase in China's GDP and social welfare. Simultaneously, the electronic information industry will not suffer from a devastating impact. On the contrary, its output and exports will expand especially the exports to the other countries in the world. Bilateral trade liberalization will also bring about"Trade Creating Effect", that is domestic products and imports from South Korea will partially substitute products from other countries. However, the negative impacts of bilateral trade liberalization mainly reflect in the increase in trade deficit and the deterioration in the terms of trade. Comparing several situations, it is obvious that the effect of the investment liberalization surpasses that of the free trade in goods. Meanwhile, in view of the imperfect competition factors, China will benefit a lot to a great extent from the larger scale of the bilateral open market between China and Korea.