(School of Economics, Zhejiang University; College of International Economics and Trade, Dongbei University of Finance and Economics;
School of Economics and Management, Hangzhou Normal University)
Abstract: Since the implementation of the reform and opening up policy, China’s foreign trade has been developing rapidly, but, despite its bulky size, China’s foreign trade is still not strongly competitive. Its transformation and upgrading has thus become an urgent mission the country is charged with. It is generally believed that exporting high-tech products will help to raise the international status of a country, and exports with geographical diversification will help to resist external risks and make full use of the international market available.
This paper investigates the export geography of high-tech and low-tech products using Chinese micro data. It is found that 40% - 55% of low-tech products are exported to neighboring countries, e.g. those in the East Asia and the Pacific region, whereas less than 40% of high-tech products are exported to the same area. Meanwhile, relative to low-tech products, the ratio of high-tech products that are exported to the European Union and North America is significantly higher. However, this is not because high-tech exporters have more destinations than low-tech exporters, but, on the contrary, high-tech exporters are actually more specialized in both product scope and destination scope.
In this paper, the extended gravity model is used to analyze the geographical distribution of the export of high and low technology products respectively. Empirical results show that the elasticity of export to distance for high-tech products is much lower than that for low-tech products while the elasticity of export to market size for the former is much higher than for the latter. The results are consistent, even with a number of measures taken to control the productivity and size of enterprises, to introduce more gravitational variables, to distinguish between different types of ownership and different regions, as well as to exclude a few special economies. These findings demonstrate that high-tech products not only prefer to serve large markets but enjoy advantages in exporting to distant destinations as well. It can therefore be easily understood that specializing in high-tech products both improves the technology in a country and extends its export geography.
Key Words: High-tech product; Export; Geographical distance; Firm heterogeneity; Gravity Equation