Exploring the Potentials of Pakistani Exports in Chinese Economy: A New Approach Based on the Calculation of Extensive and Intensive Margins

Abstract

This study attempts to explore that whether Pakistan should follow Export Intensification or Export Diversification policy for increasing its trade share in Chinese market. By employing the dataset for the period 2003-2015 the study initially computes the trade intensity index to observe the intensity of Pakistan-China bilateral trade relations and afterwards it evaluates the export growth of Pakistani products by calculating extensive and intensive export margins based on the methodology followed by Hummels & Klenow, (2005). Disaggregated trade data at HS six digit level has been extracted for two categories i.e. top most and bottom least products being exported by Pakistan to China. The findings indicate that in case of top most products exported by Pakistan to China, Pakistan is following the policy of export intensification, and the export penetration index shows that the share of Pakistani products in Chinese market is increasing by 15% per annum while on the other side in case of products which are least exported, Pakistan is following the policy of export diversification with the growth rate of exports 5% per annum. These findings helps in asserting this fact that export intensification can be more effective in increasing share of Pakistan’s exports in Chinese market instead of export diversification.