Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods

48 Pages Posted: 19 Jan 2001 Last revised: 20 Oct 2010

See all articles by Gordon H. Hanson

Gordon H. Hanson

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS); National Bureau of Economic Research (NBER)

Robert C. Feenstra

University of California, Davis - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: January 2001

Abstract

In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong distributes a large fraction of China's exports. Net of customs, insurance, and freight charges, re-exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re-exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, products sent to China for further processing, and products shipped to countries which have less trade with China. These results are consistent with quality-sorting models of intermediation and with the outsourcing of production tasks from Hong Kong to China. Additional results suggest that Hong Kong traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

Suggested Citation

Hanson, Gordon H. and Feenstra, Robert C., Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods (January 2001). NBER Working Paper No. w8088. Available at SSRN: https://ssrn.com/abstract=256912

Gordon H. Hanson (Contact Author)

University of California, San Diego (UCSD) - Graduate School of International Relations and Pacific Studies (IRPS) ( email )

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La Jolla, CA 92093-0519
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National Bureau of Economic Research (NBER)

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Robert C. Feenstra

University of California, Davis - Department of Economics ( email )

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Davis, CA 95616-8578
United States
916-752-9240 (Phone)
916-752-9382 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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