China’s Trade and Opening since 1978: A Regional Perspective from the Northeast

China’s rapid growth has masked the fact that some of its regions have failed to keep up with the modernization and efficiency drive during the market transition. China’s Northeast was once the most prosperous part of the country and a model for socialist industrialization efforts. But since the reforms and opening up, the region has struggled to turn its old industrial base into a vibrant economy. Trade represents a possible channel for stimulating economic growth, especially in border regions. Accordingly, this chapter explores the trade patterns of Heilongjiang, a border province in the Northeast, and uses a gravity model to estimate the trade costs vis-à-vis its major trading partners, and Russia in particular, over the period 1978–2017. The results indicate a profound change from a relatively isolated border region into a more open economy over the sample period. Moreover, Heilongjiang exhibits a home bias, trading with the rest of China more intensively than with any other country. The border effects with Russia are substantial, although they have declined somewhat over the past two decades. Other trading partners in Northeast Asia record lower trade costs than Russia overall, but the barriers seem to have been on the rise since the early 2000s. The discussion of the potential factors contributing to the high border effects of Heilongjiang points to the lacking infrastructure, especially the cross-border infrastructure with Russia and the costly access to seaports, as the main culprit.