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Intermediaries in Entrepôt Trade: Hong Kong Re‐Exports of Chinese Goods
Author(s) -
Feenstra Robert C.,
Hanson Gordon H.
Publication year - 2004
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.2004.00002.x
Subject(s) - china , intermediary , business , commerce , international economics , international trade , economics , finance , political science , law
In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong traders distribute a large fraction of China's exports. Net of customs, insurance, and freight charges, re‐exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re‐exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, and products sent to China for further processing. These results are consistent with the view that traders resolve informational problems in exchange. Additional results suggest that traders price discriminate across destination markets and use transfer pricing to shift income from high‐tax countries to Hong Kong.