Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders

Using a unique survey data on agricultural traders in China in 2004, this study provides direct evidence on the significance of inter-regional trade barriers and their key components. Our major findings are as follows. (1) The trade barriers within China are fairly small, accounting for about 20% of trade value. (2) Transport and non-transport costs respectively contribute 42% and 58% to the trade barriers. (3) Labor and transport-related taxes are the two largest proportions of total transport costs, and respectively account for 35% and 30%. (4) Artificial trade barriers created by the government are not sizable as we perceived. (5) Road quality is crucial for reducing transport costs within China: increasing transport speed by 1 km per hour, the total transport costs for Chinese agricultural traders would decrease by 0.6%, mainly due to improved fuel-burning efficiency and reduced labor requirement.

► The trade barriers within China account for about 20% of trade value. ► Transport and non-transport costs respectively are 42% and 58% in trade barriers. ► Labor and government taxes are the two major components in transport costs. ► Road quality is crucial for reducing transport costs within China. ► Increasing speed by 1 km/hour can reduce transport costs by 0.6%.