The Home Market Effect in China’s Manufacturing Export
|Keywords||home market effect market scale trade cost factor endowments|
It is believed that in the case of Monopolistic competition and increasing returns to scale, a country of excess demand for a product will eventually lead to the country’s becoming a net exporter of the product. Does home market effect exist in China’s manufacturing exports? Is home market effect able to pull the continued growth of the export trade? Is there any difference between the HME in different industries. This article will answer these questions on the basis of HME and empirical analysis.This article first draws and the extends the Weder(2003) model. It introduces the factors of Industry Attributes, factor endowments, the level of research and development, foreign participation into the model. Second, this paper examines the existence of HME using the static and dynamic panel model. Third, the article analyzes the factors that affect the HME.At last, the article examines the existence of HME in other emerging market economics, and compares them to China.By empirical test, we find that the HME exists in most of the Chinese manufacturing industries, the home market effect has become one of the decisive factors of the mode of foreign trade in China’s manufacturing industry. The industry attributes, factor intensity and trade costs will have some impact on the the existence of HME. Relative to the other BRIC countries, the HME in China’s manufacturing is stronger. China should take full advantage of its huge market advantage to promote the growth of their export. The conclusion of this paper provides a theoretical basis for China’s policy to expand domestic demand and to promote export growth through domestic demand.