A Trade Tale of Two Countries: China and India

28 Pages Posted: 10 Aug 2011

See all articles by Miaojie Yu

Miaojie Yu

Peking University - China Center for Economic Research (CCER)

Wei Tian

Peking University - Guanghua School of Management

Date Written: August 10, 2011

Abstract

The paper first analyzes the pattern of trade for China and India in the new century. We find that: (1) Both countries have high openness ratios that positively associated with their growing labor productivity over years. (2) China’s world export share keeps increasing whereas India maintains a stable but relatively small world exporting share in the new century. (3) Both countries exhibit a large extent to intra-industry trade though both export a large proportion of heavy-industry manufacturing products. (4) China exports more complicated and sophisticated products than India, though the gap is narrowing down over years. (4) India exports a significant share of high-technology products, though such a proportion is much smaller than that of China, when taking processing trade into account. (5) Processing trade plays a dominant role for China’s exports whereas it is relatively unimportant for India. We then seek for different policy settings in the two countries to interpret such similarity and differences. We conclude that the key reason for different trade performance in the two countries is the late adoption of the outward-promotion policy of India compared to that of China. To illustrate this point, we provide a careful scrutiny by the setup of special economic zones, by the access of the GATT/WTO, by the evolution of tariff reductions, and even by trade facilitation in the two countries.

Keywords: Trade Pattern, Intra-industry Trade, Export Sophistication, Revealed Comparative Advantage, Bilateral Trade, Trade Facilitation

JEL Classification: F10, F11, F12

Suggested Citation

Yu, Miaojie and Tian, Wei, A Trade Tale of Two Countries: China and India (August 10, 2011). Available at SSRN: https://ssrn.com/abstract=1907715 or http://dx.doi.org/10.2139/ssrn.1907715

Miaojie Yu (Contact Author)

Peking University - China Center for Economic Research (CCER) ( email )

Beijing, Beijing 100871
China
+86-10-6275-3109 (Phone)

HOME PAGE: http://mjyu.ccer.edu.cn

Wei Tian

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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