A Dual Margin Analysis On China’s Exports: From The Perspective Of Export Destination

A series of reform and opening up policy makes China become more close to the world. Because China has abundant labor resources, in a long period of time, labor-intensive products dominate in China’s export to other countries. China implements the strategy of "market diversification" since 1991, hoping to expand the export to developing countries, and getting rid of the dependence on developed markets, thus reducing the risk of export. But in recent years, many problems began to appear, such problems are as follow. Trade frictions against China appear constantly. The external economic environment is having a great impact on the export of China. The trade surplus is so huge that the number of foreign exchange reserves increase constantly. The pressure of appreciation of Renminbi is increasing. The rise of labor costs makes China lose advantages in labor-intensive industries. If we were to solve these problems, it is necessary to study what results to China’s export growth.As the representative of the enterprise heterogeneity trade theory model, Melitz (2003) surpasses traditional trade theories which assume enterprises are homogeneous, he explains the role of the new products in international trade. Melitz (2003) find that exporting more new products improve productivity levels of export enterprise(Bemard etl,2006) and bring more welfare(Bernard etl,2007;Feenstra, 2009). Since then, many scholars began to study a country’s export growth from the perspective of intensive margin and extensive margin. As the theoretical analysis of dual marginal mechanism becomes verified in the practice of trade(Feenstra,2006), the analysis of the structure of dual marginal becomes important to understanddifferent export patterns. On the basis of the theoretical framework above, this paper will study export dual margins from the perspectives of product and destination, and try to decompose dual margins.Firstly, this paper reviews the domestic and foreign literature relating to product quality systematically. It then analyses the current situation of export trade in China and studies the typical facts and changes in the export to different areas or groups and China’s export growth in manufacturing industries. Secondly, this paper takes example from Amurgo Pacheco and Pierola (2008), who introduce export destination to study China’s export growth. Thus, in this paper, the decomposition of dual margins includes product diversification and destination diversification. This paper adds a perspective to do research on China’s export growth, so the result of study is more comprehensive and robust. Lastly, in the empirical research, we use the statistics from 1995 to 2011, which are downloaded from Comtrade database and we give a feature analysis of the factors that influence the 28 export industries, trying to give the answer to the questions above.