This study investigates the patterns and determinants of China’s intra-industry trade (IIT) with Korea, one of major trading partner for each other. Thanks to China’s rapid economic growth and also to global trend that enhances regional integration, bilateral trade of China and Korea was highly affected within its trade pattern. Recently, the IIT share has been rising accounting nearly half of its trade. In this regard, this study examines the IIT pattern of China and Korea. The trade pattern has been analyzed from 2000 to 2011, developing econometric models to test the specific determinants of the IIT between China and Korea. Also at the same time, I disentangled IIT to Horizontal and Vertical IIT to compare the regression result with IIT as a whole. This was to find out any differences detected from China’s economic development. The empirical result has shown that research intensity, income per capita gap, China’s industrial development played significant role in IIT. R&D which represents Korea’s technological improvement in product and China’s industrial development played positive role for IIT, however the income per capital gap had a negative relations. This fosters the previous studies assumptions. However, FDI, which has been a key determinant that drives IIT did not show significance in the regression. Still it is to worth to see the result of the regression since it reflects the recent fluctuation of inward FDI to China. Keyword: Intra-industry Trade, Horizontal Intra Industry Trade, Vertical Intra Industry Trade, Product differentiation, FDI, China’s economic growth
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Intra industry trade pattern in bilateral trade of Korea and China
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