Intra-industry Trade and the Development of China's Processing Trade

s: Scale-economic-effect and technology differentiation have helped the fast development of postwar intra-industry trade and it has soon substitute inter-industry trade to be the main form of international trade. Attributed to technology differentiation and the labor-division within the products (labor-division in processes), intra-firm trade of transnational companies developed very quickly. And with their developments of FDI to china, processing trade is becoming the important prompting factor of intra-industry trade in the manufacturing field of our country. To prompt the modernization of processing trade, and push the intra-industry trade to grow from vertical forms to horizontal ones between our country and developed countries, we must utilize the transnational companies' technical spill-out effect to facilitate relative industries' technical progress and industrial structure promotion. At the same time, it's necessary for the strategic trade policy to protect domestic markets and thus to gain scale economic effect to speed up the growth of our country's intra-industry trade.