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

33 Pages Posted: 3 Jun 2004

See all articles by Robert C. Feenstra

Robert C. Feenstra

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

Gordon H. Hanson

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

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Abstract

In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong traders distribute 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, and products sent to China for further processing. These results are consistent with the view that traders resolve informational problems in exchange. Additional results suggest that traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

Suggested Citation

Feenstra, Robert C. and Hanson, Gordon H., Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods. Journal of Economics & Management Strategy, Vol. 13, No. 1, pp. 3-35, March 2004. Available at SSRN: https://ssrn.com/abstract=528387

Robert C. Feenstra (Contact Author)

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

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National Bureau of Economic Research (NBER)

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Gordon H. Hanson

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
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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