The Study of electronic and communication equipment Intra-industry Trade and Effect of Technical Progress in China

Zhang Xiaofen

Economics school， Liaoning University of Technology，Jinzhou，China E-mail：dtz218@sohu.com

Abstract—Since the economic globalization, intra-industry trade has gown rapidly all over the world , and the intra-industry proportion of china has constantly increased. As electronic and communication equipment products play an important role in technical progress, it is vital to study the relationship between electronic and communication equipment product intra-industry and technical progress effects under the circumstance of upgrading industries of our nation.

First of all, the paper ensures the concepts of IIT and measurement methods of IIT, elaborating and analyzing the development condition of electronic and communication equipment product intra-industry of china from 1995-2009. Econometrics models based on Computers and telecommunications, Electronic have established to analyze the relationship of electronic and communication equipment product intra-industry and technical progress effect. Through the empirical analysis, it can be concluded that: the electronic and communication equipment product intra-industry trade has a positive impact on technical progress, and the effect of export is more significant than import. However, as the relatively low level of electronic and communication equipment intra-industry trade of our nation, the technical progress from trade is limited, therefore China should improve IIT degrees; insist on the principles of independent innovation; imitation and absorption; expanding export and domestic demand, form the technical progress mechanism that possessing our nation's characteristics, enhance the competitiveness of products and realize the technical upgrading of industry.

Keywords- electronic and communication equipment，

intra-industry，technical progress，empirical analysis

I. INTRODUCTION Intra-industry trade refers to a period of time in which a

country exports and imports goods belonging to the same industry in the same time. It is a concept which is relative to the inter-industry trade with a balance of trade, a redistribution of income and so on. The current global trade industry trade accounts for about one quarter, and the share is still growing. Compared with the inter-industry trade, intra-industry trade has some advantages, which can optimize the industrial structure, promote economies of scale and so on. And it can promote the economic development of participating countries better. Improving the level of intra-industry trade is an

important means to improve the external competitiveness, and it is also the objective requirements of economic development.

In order to testify the impact of Chinese high-tech industry’s Intra-industry Trade on technological progress, xuhui”s paper conducted an empirical research towards the extent of high-tech industry’s Intra-industry Trade and technological progress rates

Some paper described the basic theory of intra-industry, introduced the overview of intra-industry development. Domestic journals had published a number of papers that are similar to the works mentioned above.

At present, research on the relationship between international trades, technical progress and productivity have received extensive attention. There are many research attempted to make analysis on it, but little have specific to particular industry, especially to electronic and communication equipment industry of China. In order to improve China’s trade of high-tech electronic and communication equipment products and its competitiveness, this paper does a further research.

II. STATUS OF INTRA-INDUSTRY TRADE OF CHINA'S ELECTRONIC AND COMMUNICATION EQUIPMENT

A. Situation of Intra-industry trade With the development of science and technology ,the

proportion of intra-industry trade is improving and China's trade pattern is beginning to show the tends of development from inter-industry trade to intra-industry trade .Since the 90s of the 20th century, the global electronics and communications equipment industry has undergone tremendous changes in structure and integration. In this process, China's electronic and communication equipment industry has been developed rapidly, China’s domestic and international status has ascended faster, with international electronics and communication equipment industry dependent degree increasingly strengthened. This paper studies the electronic and communications technology product definition for computer and communication technology, electronic technology products

Computer and communication technology products as main high-tech products in China have been exported to overseas markets, which is in accounted for 74.2% of total exports in 2008. And export of computer products is more outstanding with accounting 48.3% for all high –tech products export. Computer and communications technology was the primary area of imports. But since 2002, electro-mechanical

978-1-4244-6581-1/11/$26.00 ©2011 IEEE

βαitititit LKAY =

products have become the biggest foreign demand for our country market. And the electronic and communication equipment products are accounted for all high –tech imports of 41.1% and in 2008 the figure rises to 57.2%.

Table2.1China's import and export of electronic and communication technology products trade（1995-2009）Unit: USD million

Source: China Science and Technology Statistics Net http://www.sts.org.cn/index.asp

B. calculation of China's electronic and communication equipment intra-industry trade index Intra-industry trade refers to a country who exports and

imports of both goods belonging to the same industry in a period of time. IIT current internationally accepted formula is

proposed by Grubel and Lloyd in 1975 and named that:

Type: Xi and Mi respect export and import values of I industry in one country in a certain period. When IITi is 1 that means import and export is completely intra-industry trade; When IITi is 0 means no intra-industry trade. The size of intra-industry index is Consistent with the importance of intra-industry trade, namely the index and intra-industry trade in the changing relations between the performance for the positive correlation. According to the G L formula can be calculated 1995-2009 China's electronic communication equipment intra-industry trade intra-industry trade index (table 2.2). Table 2.2 China's electronic and communication technology products IIT index

Source: China Science and Technology Network finishing out of statistics Table 2.2 shows that the proportion of intra-industry

trade of computer and communications technology is increasing from 1995 to 2000, and the average IIT index has been above 0.9, which is close to the full level of intra-industry trade. And IIT index began to decline from 2002. If combined with the changes of trade volume ,in the peak period from 1995 to 2001 ,Although the intra-industry trade index is high, the trade volume is small. The main reason of intra-industry index decline is that the rapid growth of net exports. Especially after 2001 the gap was growing. (Electronic technology products for that matter)

This change is caused by process of adjusting the internal product structure of the electronic communications equipment and manufacturing. The electronic communication equipment manufacturing of our country experiences a progress from a relatively low technical level products to a relatively electronic and communication equipment level products. After 2001, industry trade index decreased significantly, which was caused by the rapid growth of China's exports with trade volume analysis.

III. EMPIRICAL ANALYSIS OF THE EFFECT THAT CHINA'S ELECTRONIC AND COMMUNICATIONS PRODUCTS INTRA-INDUSTRY TRADE HAVE ON TECHNICAL ADVANCEMENT.

A. Selection and description of the data 1) Total Factor Productivity What we want to study is the effect of the intra-industry

trade on technical advancement. Therefore, quantitative analysis of technological progress is very important. The progress of technology is mainly due to increase inputs elements and the improvement of the efficiency. With the development of society and the progress of science and technology, the using efficiency of elements plays an important role. in the economic growth , In the economic sphere, TFP is usually used to represent the elements of total factor productivity. This article will use total factor productivity to represent the technological progress and the electronic and communication equipment products intra-industry trade to analyze. Assuming Hicks neutral technical progress, there will be the

following general form of Cobb - Douglas production function:

On both sides of the type also take logarithm :

ititititit LnLnLLnKLnALnY εβα +++= ** Yit here refers to production, Kit refers to the physical capital stock, Lit refers to labor, Ait refers to technological progress, i and t represent the country and time, α and β represent the output elasticity of capital and labor. This paper set our production function for Cobb-Douglas production function, according to "Solow'ssurplus":

Year Computer and communications

technology products Electronics Products

Exports Imports Exports Imports

1995 6249 3328 1073 2916 1996 7670 5274 1316 3794 1997 10746 8107 1856 5777 1998 13663 11407 2940 7790 1999 17246 14900 4210 11800 2000 27012 20628 5838 19325 2001 36228 20860 6753 24141 2002 54487 27890 7503 34063 2003 91931 40306 11423 53591 2004 136215 50695 18430 77149 2005 177106 60342 24477 100882 2006 224898 70693 36004 130187 2007 279609 78127 45669 156910 2008 308450 79661 55402 161157 2009 282645 73585 51075 148481

Year Computer and communications technology

Electronics

1995 0.841 0.541 1996 0.935 0.524 1997 0.860 0.541 1998 0.910 0.548 1999 0.927 0.526 2000 0.866 0.464 2001 0.789 0.386 2002 0.677 0.361 2003 0.610 0.351 2004 0.542 0.386 2005 0.508 0.391 2006 0.478 0.433 2007 0.437 0.451 2008 0.411 0.552 2009 0.413 0.512

ii

iii MX

MXIIT

+−

−= 1

LnLLnKLnYLnTFP βα −−= Among them: Y, K and L denote output, capital and labor

inputs, TFP is total factor productivity, α, β, respectively, represent the capital and labor output elasticity, α + β = 1. In the actual calculation in this paper, gross domestic product (GDP) is used to reflect the level of aggregate output Y, with a total investment in fixed assets, said capital (K), the number of persons employed by the whole society of labor (L). Table 3.1 GDP of China from 1994 to 2008 and the whole society investment in fixed assets in society as a whole number of employees

Data sources: the 2009 China Statistical Yearbook, sorting out

Assume scale remuneration is changeless, hypothesis α = 0.557, β = 0.443.The generation going into the formula can be obtained in 1995 to 2009 in China's TFP.

2) Selection of variables

This paper is aimed at the computer and communication technology, electronic technology in the field of import and export trade between model analysis (specific amount to see table 2-1)

B. Model established According to the formula of computer and communication technology products, electronic technology products,we build a following model: Model 1: the influence about computer and communication technology products intra-industry on the progress of technology

βα IMCEXCATFP ++=

Model 2: the influence about electronic technology products intra-industry trade on the progress of technology

βα IMEEXEATFP ++= TFP represents technical progress level. EXC and IMC respectively represent computer and communication technology exports and imports, EXE and IME respectively

represent electronic technology product exports and imports. Because the data does not change the natural logarithm of the time series nature and relationship, and it tends to linear, so both sides of the logarithmic equation.

γ1 γ2 represent constants, α1α2 respectively represent the computer and communication technology products, electronic technology products export driving technology advancement of coefficient, β1β2 respectively represent the computer and communication technology products, electronic technology products imported driving technology advancement of coefficient.

C. Empirical analysis 1) Test of Stability

If a random process of mean and variance are constant on the time course and in any two periods of covariance value only depends on the two, during the distance or lags behind, but it does not depend on the variance of practical calculation time, we call it stable.

To test the variables , the most commonly used method is to smooth Dickey - Fuller test (ADF test).This article will use the method of model variables LNTFP, LNEXC, LNMC, LNEXE, LNIMEE stationary sequences tested, with iLNTFP, iLNEXC, iLNMC , ILNEXE, iLNIME on behalf of the first

order difference sequence. Test results are as follows: Table 3.4 ADF Test Results ADF test results show that the 5% significance level, LNTFP, LNEXC, LNIMC, LNEXE, LNIME level sequence can not be rejected the existence unit root null hypothesis, non-stationary series; but the sequence is stable after the first difference and the premise condition of co-integration test.

2) Co-integration test Because each sequence are stationary series and is a

whole sequence, can undertake co-integration relationship inspection. The results are as follows: Table 3.5 Co-integration test results table

From Table 3.5, the ADF residuals were less than 5%

significance level critical value, further information LNTFP and LNEXC, LNIMC, LNEXE, LNIME, have long-term

Year GDP Social investment in fixed assets

The whole society number of employees

Y K L 1995 59810.5 20019.3 68065 1996 70142.5 22913.5 68950 1997 78060.8 24941.1 69820 1998 83024.3 28406.2 70637 1999 88479.2 29854.7 71394 2000 98000.5 32917.7 72085 2001 108068.2 37213.5 73025 2002 119095.7 43499.9 73740 2003 135174 55566.6 74432 2004 159586.7 70477.4 75200 2005 184088.6 88773.6 75825 2006 213131.7 109998.2 76400 2007 239258.9 137323.9 76990 2008 302853.4 172828.4 77480 2009 340507 224846.0 78560

Year 1995 1996 1997 1998 1999 Ln TFP 0.5524 0.6308 0.6849 0.6690 0.7002

Year 2000 2001 2002 2003 2004 Ln TFP 0.7437 0.7675 0.7734 0.7595 0.7886

Year 2005 2006 2007 2008 2009 Ln TFP 0.7992 0.8229 0.8116 0.9164 0.8972

Sequence ADF value 5% critical value

Conclusion

LNTFP 1.858326 -1.9677 Unstable iLNTFP -4.103403 -1.9699 Stable LNEXC 7.470994 -1.9677 Unstable iLNEXC -4.407950 -1.9699 Stable LNIMC 5.510239 -1.9677 Unstable iLNIMC -1.986298 -1.9699 Stable LNIME 7.481464 -1.9677 Unstable

iLNUME -3.986057 -1.9699 Stable LNEXL 4.655909 -1.9677 Unstable iLNEXL -5.105726 -1.9699 Stable

Co-integration variables associated with the LNTFP

ADF value 5% critical value

LNEXC LNIMC -4.690965 -1.9677 LNEXE LNIME -4.717567 -1.9677

LnIMELnEXELnTFPLnIMCLnEXCLnTFP222

111

βαγβαγ

++=++=

stable relationship. The OLS co-integration regression is equation obtained:

Model 1: R ² = 0.9733 F = 91.0345 DW = 2.0646 Model 2: R ² = 0.9805 F = 125.9414 DW = 1.9076

R ² has reached more than 0.8 and indicating the goodness of fit of the equation is higher. F value of each model's level of 0.05 was significantly greater than the critical value, so the two general equations are significant. DW values of the two models are in the non-self-related area and the equation does not have an error term autocorrelation.

3) Granger causality test Although the co-integration test can determine a time

extent of the relationship between two variables, it does not involve a causal relationship between them. To further examine the causal relationship between variables, this paper will take the Granger causality test method within the causal relationship between the effects of the test.

Test results are as follows: Table 3.6 Granger causality test results table

By the Granger causality test results can be obtained that in addition to computer and communications technology products, import and technological progress beyond the causal relationship is not clear. Computer and communications technology exports, electronics industry trade exist in Granger and technical progress causality, that is, its intra-industry trade exists to promote the role of technological progress. And the technological progress on intra-industry trade is also playing a limited role.

IV. CONCLUSION AND SOLUTIONS

A. Computer and communications technology intra-industry trade impact of technical progress

Model 1 can be drawn by computer and communications technology products that the import did not produce positive effects of technological progress. And imports have increased by 1 unit and technological advances reduce the 0.892 units, but the export of technological progress on the significant increase in exports of 1 per Units and technological progress have increased levels of 3.0951 units. As Granger causality test shows, computer and communications technology products are export-led technological progress, while imports are not. Computer and communications industry in China has international further occupation and enlarge market share, so they must produce high quality, electronic and communication equipment content of differentiated products. Our computer and communication technology products are mostly exported to technology developed countries (the United States, the

European Union), developed countries and areas of the high demand for products to the market demand and personalized enterprise raises the technical level and establish brand in order to meet the market.

B. Intra-industry trade of electronic technology products drives the technology progress

China's electronics imports and exports of technology products can promote skills enhancement, in which electronic technology exports have increased by 1 unit, and technological progress have increased levels of 1.0722 units and imports have increased by 1 unit and technological progress have increased 2.3659 units. Then electronic technology products, import and export have passed the Granger causality test, which are the electronic technology products of Intra-industry trade and causal relationship between technological advances. Electronic technology products of the Intra-industry trade lead to the development of technology. The influence exports of China's import of electronic technology products are greater than the impact of technological advances.

Combined with the actual situation in our country, our country’s electronic technology industry is developing and to raise the level of electronic technology development needs to import foreign advanced products to imitate and absorb and re-export them, which are both to promote technology development. It also can be concluded that a large number of developing countries import foreign advanced technology and products, do not just stay in the simple use of imported products, but should be effective on advanced foreign technology imitation and absorption, and gradually innovation, and become a model of the formation of imports - Imitation - innovation - the positive effect of re-export mechanism. Our country should continue to open trade policy, and actively introduce advanced capital and technology. At the same time of the competition and cooperation, our country should make full use of the exemplary role of foreign-funded enterprises to complete the restructuring of the technology of electronic communications equipment manufacturing industry and the reform of corporate governance structure, to enhance the competitiveness of local enterprises. At the same time, enterprises should increase investment in research and development to strengthen cooperation between universities and have efforts on developing its own intellectual property rights of enterprises and go for the technical forefront of the world.

REFERENCES [1] Keller W. Geographic localization of international tech-nology

diffusion[J] .American Economic Review, 2001, . [2] Qiuyi, The effects of intra-industry trade of Chinese manufactured

goods on technology progress, Studies in Science of Science [3] wangkai, ma-qingguo, Research on Technological Innovation

Capabilities of Chinese Manufacturing Industries Based on Factor Analysis Rating Method, Journal of China University of Geosciences(Social Sciences Edition)

[4] Xuhui: Technical Progress of Intra-industry Trade Effects: Take Our High Technology Industry for Example, value engineering

Null Hypothesis: Obs F-Statistic

Probability

LNEXC does not Granger Cause LNTFP 13 3.38175 0.04631 LNTFP does not Granger Cause LNEXC 0.63110 0.55655

LNIMC does not Granger Cause LNTFP 13 4.62244 0.08621 LNTFP does not Granger Cause LNIMC 0.01331 0.98680

LNEXE does not Granger Cause LNTFP 13 9.46145 0.00780 LNTFP does not Granger Cause LNEXE 0.91000 0.44047

LNIME does not Granger Cause LNTFP 13 3.97109 0.04341 LNTFP does not Granger Cause LNIME 1.15009 0.36390