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Research on the Influence of Shanghai Import Trade Structure on

Technological Progress*

XIE, Guoe YU, Jia

(Business School, East China University of Science and Technology 200237)

Abstract: Based on the statistical data from 1995 to 2018, this paper uses regression analysis,

error correction model and impulse response analysis to empirically test the specific impact of

import trade structure on Shanghai's technological progress. The results show that the decrease in

the proportion of intermediate goods imports promotes the technological progress, while the

increase in the proportion of capital goods imports has a significant positive impact on Shanghai's

technological progress. The relationship between FDI and technological progress in Shanghai is

negative. The development of Finance and the increase of patent authorization promote the

technological progress of Shanghai. The stability test of VEC model shows that there is a long- term equilibrium and stable relationship among the variables. Impulse response analysis shows

that there is a bidirectional interaction between the import trade structure and Shanghai's

technological progress. Therefore, we should further reduce the quantity of intermediate goods

with low technology content and increase the import volume of capital goods appropriately. At

the same time, we should attach importance to innovation based on introduction and absorption

and use the platform of China International Import Expo to attract foreign enterprises to widely

display new products, new technologies and new services of various countries, so as to help high- quality development in the future.

Keywords: Import of intermediate products; Import of capital goods; high quality of import;

Technological progress; Shanghai

1. Introduction

Since China’s accession to the WTO in 2001, economic globalization has developed rapidly.

Foreign trade has become one of the "troikas" driving the country's economic development. China's

trade surplus has continued to increase, which has also induced trade frictions with other countries. In

response to this, the balanced development of import and export trade was proposed at the 17th

National Congress of the Communist Party of China. In 2014, President Xi Jinping put forward the

key words of "new normal", emphasizing that in the period of China's comprehensive deepening

reform, the implementation of innovation strategy and adjustment of unbalanced and uncoordinated

development are the primary tasks of China's development. In recent years, China's export trade has

been further affected due to the Brexit of the UK, the intensification of Sino US economic and trade

conflicts, the emergence of anti globalization and the rise of Global trade protectionism. In this

context, China holds high the banner of economic globalization and continues to advocate trade

liberalization. Since 2018, China International Import Expo, the world's first large-scale national

* This study is supported by Shanghai Municipal Philosophy and Social Sciences Planning General Program

(2018BJB025).

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exhibition with import as the theme, has been held, opening up the Chinese market for the global

economy, and also marking China's further opening up and attention to import trade. Generally

speaking, a country's technological progress can be achieved through independent innovation and

external technology spillover. Therefore, we should pay attention to both independent innovation and

external technology spillover brought by trade opening. At present, China has entered a stage of high- quality development. The main connotation of this stage is the transformation from total expansion to

structural optimization. Therefore, it is of great significance for China's economic development to

optimize the import trade structure according to China's national conditions and pay attention to the

technology spillover effect brought by import.

Regarding the relationship between import trade and technological progress and economic

growth, the Neo-Classical Growth Theory held that with the continuous improvement of domestic and

foreign trade openness, the competition between countries had gradually manifested itself as a

competition between technological advantages. To gain a firm foothold in international competition,

advanced technological advantages were inevitably needed [1]. In the early 1980s, Paul Krugman

proposed a new trade theory, arguing that the main reason for technological progress was import trade.

New Growth Theory emphasized the technology diffusion effect of international trade and believed

that foreign trade could promote technological progress [2]. Endogenous Growth Theory believed that

import trade promoted the diffusion of technology internationally, and the host country learned to

imitate technologies while importing goods. Finally, the host country achieved the goal of improving

its technological progress and economic growth [3]. Coe-Helpman (1995) demonstrated that

international trade could cause international R&D knowledge spillovers. The higher a country’s trade

openness was, the stronger the effect of international R&D knowledge spillovers on the total factor

productivity of importing countries [4]. Keller (2002) put forward an R&D-driven growth model and

believed that R&D investment was mainly reflected in the differentiation of intermediate products,

which spread technology to other sectors at home and abroad through trade, thereby promoting

technological progress in importing countries [5]. Sorin (2010) studied the relationship between trade

and total factor productivity of 47 countries from 1990 to 2006 and found that import was still the

channel of technology diffusion between countries [6].

Due to the long-term emphasis on exports, domestic scholars have paid relatively late attention

to the study of technological spillover effects of imports. The study of Ye and Zhao (2008) showed

that a country’s import trade would promote the country’s technological progress and productivity

through technology spillover effects. Among them, intermediate goods have the most significant

impact on technological progress, but technological progress in turn cannot effectively promote

optimization of import trade structure [7]; Jiang (2012) studied the data of 29 different provinces in

China from 2001 to 2007 and found that the technological spillover of commodities brought about by

import trade is indeed beneficial to improve the technological progress of the importing region [8].

Shen and Li (2012) used the data from 1992 to 2010 to construct a dual-threshold model. The study

found that import trade would bring about technology spillover, but the effect of technology spillover

varies with the absorption capacity of each region [9]. Based on the data of China's 13 major import

source countries from 2000 to 2014, Luo and Zeng (2017)) found that the import of low-tech and

agricultural intermediate goods is not conducive to a country's technological innovation, while the

import of high-tech and resource-based intermediate goods has a positive role in promoting China's

technological innovation [10]. Wang et al. (2017) studied the import trade data of various provinces in

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China from 1997 to 2015 and found that import trade could promote China’s technological progress

through R&D spillover effects, of which capital goods imports have the most obvious promotion

effect [11]. Based on the provincial data from 2008 to 2017, Tao and Wu (2020) found that imported

high-tech products would promote high-quality economic development by promoting technological

progress and improving market efficiency [12]. Based on the data of China's manufacturing industry

from 1998 to 2011,Huang and Li (2020) found that the competitive effect of import trade has a

stronger promotion effect on technological progress than that of technology spillover [13].

Through literature review, it is found that most of the studies focus on countries, and few

specifically study the impact of trade structure of a province on its technological progress. Since the

development of various regions, provinces and cities in China is very uneven and the situation is very

different, the analysis of a country as a whole will obscure the differences of local economic

development, so it is more targeted to study the specific impact of import trade structure on

technological progress based on the provincial level, which can reveal the different characteristics and

results of different regions. Shanghai is China's largest economic and trade center, a leader in China's

economy, and the site of the China International Import Expo. It has been ranked first in the GDP of

various provinces and cities for the past 10 consecutive years. So, does the structure of Shanghai's

import trade have an impact on its technological progress? What is the direction and extent of the

impact? The study of this issue will bring useful enlightenment to the adjustment of Shanghai's import

trade policy. According to the BEC trade classification standards, this article divides imported trade

goods into intermediate goods and capital goods, studies the relationship between import trade

structure and technological progress in Shanghai, and examines the impact of domestic financial

development, patent authorization and FDI control variables on technological progress in Shanghai.

2. Model Setting and Variable Measurement

2.1 Model Selection

Internationally, different classification standards have been formulated for imported traded

commodities. Common classification standards include SITC, HS code and BEC. The first two

categories are classified from the perspective of production and supply and are more commonly

used, while BEC is classified from the perspective of demand, which classifies all products into

three categories: capital goods, intermediate products and consumer goods. Since consumer

goods directly enter the field of terminal consumption, it is difficult to have an impact on

technological progress. Therefore, the import trade structure in this article mainly refers to

intermediate products and capital goods in imported products. Based on BEC's classification of

import trade structure, this paper constructs corresponding indicators. At the same time, three

control variables of patent authorization, foreign direct investment and financial development are

added to the regression model. This paper focuses on the impact of import trade structure on

Shanghai's technological progress. The specific regression model is as follows:

ln TFP = α! + β"lnPAI + β#lnPAC + β$lnFDI + β%lnFIN + β&lnINNOV + μ'(

Here, we take logarithmic form on both sides of the equation, which can reduce

multicollinearity and eliminate the influence of dimension to a certain extent. Among them, TFP

is the explained variable, which represents the technological progress of Shanghai. PAI and PAC

are the core explanatory variables, which respectively represent the import trade volume of