並列摘要
Since China has launched its reform and open-door policy in 1979, it has achieved remarkable progress in economic development. China has very high trade-GDP ratio and the largest market for FDI flow amoong the developing economies. As a result, Chinese economy has been increasingly integrated to the world economy. Not only does FDI play a significant role in supporting China’s economic growth but a new network of production and services in vertical-specialization-based trade also has been developed. This has been witnessed especially in the cross-strait relations between Taiwan and Mainland China. Importantly, this vertical-specialization-based trade is increasingly depended on exchange of parts, components and other intermediate products to produce goods it later exports, reflecting the sequential stages of production networks among many different countries. In this paper we modify the Ricardian model of Dornbusch, Fischer and Samuelson（1977）to setup up a model with three countries and two stages of production to study the effects of vertical specialization on the changes of trade patterns especially to explain why some of Taiwan exports to the United States are replaced by China exports.