A Hypothesis on Quality Threshold in China's Product Export and Its Verification

This paper analyzes the trade model containing product quality variable and concludes that the product quality is determined by the quality preference of the export destination market and export firm's productivity in market equilibrium term.Based on the relevant theory and model,a hypothesis on quality threshold is put forward for the first time in the paper.By building product quality index,the empirical study on China's export data shows there exists the quality threshold which plays a positive role in improving the product quality of China.Every 1%increase on per capita GDP of export destination country will prompt China's export product quality to increase by 0.14%,however,the export destination country's market scale has no significant impact on China's export product quality.The high-income countries have high quality thresholds since these countries have stronger quality preference,which leads China's export product quality toward such countries to increase by 26.5%than toward low-middle-income countries if we control the rest of the variables.The results of cross-industry regressions demonstrate that the impacts of the quality threshold effect vary across industries,the impact on the high-tech industry is strongest and the effects on the primary and natural resource industries are weakest.Since China's per capita income is relatively low,the condition of low domestic quality demand impedes the improvement of product quality of China,so it is an important way to improve China's product quality by developing foreign trade especially toward high-income countries.As for trade policy based on economic effect perspective,the strategy of multi-market export is not sure the best foreign trade policy choice for China.