Online inter-provincial trade in China

Abstract

There is a large disparity in terms of per capital e-commerce consumption between more developed east coastal provinces and less developed inner provinces in China, which reflects the disparities in economic development and income between these regions. E-commerce could integrate China’s domestic economy as it facilitates cross-region flow of goods, strengthens regional linkage, and becomes the channel through which economic growth in one region spills over to other regions. On the other hand, e-commerce could also make regions more divergent. With a reduced trading cost, regions with comparative advantages in certain industries could have even wider and farther reaches and enjoy increasing returns. In this study, we specifically examine the pattern of e-commerce activities in China over time. We find that the production and sales of agricultural and clothing products have become more concentrated over time. The trade pattern as measured by trade flows among different provinces is mixed. While the pattern is slightly more concentrated in B2C platform, the pattern is more diversified for C2C market. Our regression analysis indicates that GDPs in origin provinces positively affect the trade flows, but distances impede trade, consistent with the gravity model. Interestingly, GDPs of the destination provinces are not significant. Home market effect is also supported.