Cargo Insurance The Trade Involved In China-analysis Based On The Transaction Cost Theory

As the growing trend of trade in China, the total amount of import and export is increasing so as the amount of trade companies are. Cargo insurance the trade involved is faced to the situation of developing opportunity. There are some reasons for it. First of all, as one of the biggest export countries, home insurance companies may have more potential cargo insurance clients than before. Besides, specialized foreign trade companies is growing more professional and the shipping companies has more global experiences, which also is an opportunity for the advancement of cargo insurance. Last but not the least; insurance is also in the trend of reform and open policy, so they can learn more foreign experience and have been funded into the home companies. But at the same time, the growing of cargo insurance is curbed by the foreign trade policy and their strategies. Actually, cargo insurance the trade involved is growing slowly these years, especially decreasing in 2002 & 2003. So, this paper will compose of some useful facts to research the advancement problem of cargo insurance the trade involved.To demonstrate this problem, the second part of this paper will use correlation coefficient to describe the relationship of development between cargo insurance and trade. It will analyze from two angles, that are the relationship between total amount of import & export and premium of cargo insurance, the relationship between amount trade companies and the premium of cargo insurance. From the first angle, 80's to90's of 20 century the total amount of import & export is positive correlative with the premium of cargo insurance, but after mid-90 ages of 20 century, the correlation coefficient is not very distinctness. From the second angle, the change of structure of trade companies is not correlative with the premium of cargo insurance. All of these demonstrate the development of cargo insurance discord with the development of trade.According to the transaction process of cargo insurance, it is found that the transaction cost is the main cause of the cargo insurance. At the third part of this paper, transaction cost is used to analyze the factors influencing the cargo insurance development. The transaction process involves two participants, which are buys and sellers. There will also be two steps for the transaction processes, which are before transaction and after transaction. For the buys, before the transaction, he will face the cost of choosing the CIF for his export, after the transaction, he will face the claims if loss happens. For the seller, he will face the huge cost if he want open up his operations before the transaction, and he will also face the claim cost after the transaction. The analysis used by transaction is somewhat stable, so the next part it will use the game theory to simulate the process of transaction. It is lead to the conclusion of the analysis that the insurance company taking part in the negotiation process of trade company will decrease the cost of trade company, funding to the insurance company will help it decreasing its transaction cost, perfecting the system of supervision and motivation will decreasing the cost of claim, and increasing the technical help from the insurance assessor companies. At the fourth part of the paper it will give some suggestions for the developing of cargo insurance according to the analysis above, that is how to decreasing the cost of trade companies and the insurance companies.