How FDI influences the triangular trade pattern among China, East Asia and the U.S.? A CGE analysis of the sector of Electronics in China

Jing Zhou and María Latorre ()

Economic Modelling, 2014, vol. 44, issue S1, S77-S88

Abstract: This paper uses a computable general equilibrium (CGE) model to simulate the FDI inflows in the Electronics sector in China. Our aim is to capture how the causation chain works through production networks and the triangular trade pattern. China is a production base and export center for Electronics, with a heavy dependence on East Asian Electronics supply. Meanwhile, the U.S. and the rest of the world (ROW) are important markets for Electronics exports. China collaborates with East Asia in the production networks but competes with East Asia for the exports to the U.S. and ROW. The shock of FDI reinforces the pivotal role of China and intensifies its exports without any remarkable change on the pattern of the geographical destination or origin of its Electronics exports and imports. The Chinese trade links and production division remain unchanged. However, China takes up more of the world market crowding out its competitors. In this sense, after the shock, the shares in imports of Electronics of rest of regions change noticeably, showing a remarkable increase in the weight of China. East Asia will increase its exports to China, providing more intermediates for further processing. However, it will be displaced by China in the rest of the markets, thus, reducing its overall exports.

Keywords: Production networks; Computable general equilibrium; Intermediates (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:44:y:2014:i:s1:p:s77-s88

DOI: 10.1016/j.econmod.2014.04.030

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