The Effect of Cross-Border E-Commerce on China’s International Trade: An Empirical Study Based on Transaction Cost Analysis

TLDR

Policy interventions that lower transaction costs can create comparative advantages and boost international trade, yet empirical evidence on how China’s cross‑border e‑commerce policies affect trade distance and consumer welfare remains lacking. The study aims to examine how cross‑border e‑commerce influences China’s international trade by applying transaction‑cost economics alongside the comparative advantage framework. The authors analyze information, negotiation, transportation, tariff, and middle‑man costs separately to assess the effect of cross‑border e‑commerce on trade. The analysis indicates that cross‑border e‑commerce can promote China’s trade growth when tariff and transportation costs are mitigated, and the empirical results confirm a yearly positive effect, though the growth does not accelerate over time due to limited policy enforcement and global trade contraction.

Abstract

Reducing transaction costs by means of policy intervention could generate comparative advantages and contribute to the growth of international trade. Chinese government agencies have introduced a number of policies in support of rapidly growing cross-border e-commerce to promote China’s international trade. However, the previous literature has not empirically verified the precise effect of these policies on the growth of international trade while focusing on the impact of cross-border e-commerce on trade distance and consumer welfare. To address this gap, this paper investigates the impact of cross-border e-commerce on international trade in the context of China, mainly from the perspective of transaction cost economics in conjunction with the traditional comparative advantage model by analyzing information cost, negotiation cost, transportation cost, tariffs and middlemen cost separately. Firstly, the new theoretical model suggests that cross-border e-commerce may have a positive role in promoting international trade only when the negative impact caused by tariff cost and transportation cost is offset. Secondly, our result shows that cross-border e-commerce has a positive effect on the growth of China’s international trade in each year. However, the positive effect does not show incremental growth over time, possibly as a result of the weak implementation of favorable policies in trade, in addition to global trade shrinking.