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The objective of this paper is to empirically test various hypotheses about the determinants of intra-industry trade between China and its major trading partners using panel data over the period 1980-2003. To strengthen the synergies between regional economic integration (ASEAN, as an example) and the determinants of intra-industry trade (in particular, the geographical distance), so we find it very important for us to have a concrete idea on the determinants of intra-industry trade in China before (during the subperiod 1980-1991) and after (during the period 1992-2003 under) the integration of the countries in ASEAN. The results of our estimates show that the relationship between the factors and different types of intra-industry trade varies from one period to another. The results indicate that the nature of Chinese intra-industry trade is negatively and significantly correlated with geographic distance for the entire period (1980-2003) and after the integration of China in ASEAN (1992-2003). This leads us to conclude that the proximity of trading partners means lower transportation costs and information, than the trade increased. [ABSTRACT FROM AUTHOR]

For a long time, the theory of international trade and foreign direct investment theory were relatively disjoint. But empirical studies have generally found foreign direct investment (FDI) and trade enough related. FDI has proved to be a substitute for international trade (in the case of tariff jumping hypothesis - FDI oriented towards research market) or a complement to international trade (in the case of intra-firm trade). However, the relationship between foreign direct investment and trade has become much more complex in the current regime of the World Trade Organization (WTO) where many developing countries have undertaken the liberalization of imports and trade agreements that have significantly reduced transaction costs and promoted the free trade. With increasing volumes of trade, the attention of policy makers in developing countries has shifted, whether FDI leads to trade, whether the trade can stimulate the flow of FDI? [ABSTRACT FROM AUTHOR]