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China's engagement in the so-called international fragmentation of production - namely 'Cross-border dispersion of component production/assembly within vertically integrated manufacturing industries' - has become an increasingly important form of its economic integration into the regional as well as the global economy. The paper presents the recent trend of trade in parts and components between China and its main trading partners. Applying an adjusted gravity modeling method, the paper explores how China's pattern of trade in parts and components is being determined. The paper found that China's rapid economic growth, increasing market size and economies of scale, foreign direct investment and infrastructure development including transportation and telecommunications are important factors in explaining China's rapid increase of bilateral trade in parts and components with its trading partners.
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