Myanmar's Cross-border Trade with China: Beyond Informal Trade

Discussion Papers

No.625

by KUBO Koji

December 2016

ABSTRACT

Myanmar's trade with China is heavily concentrated in cross-border trade through the Yunnan province of China. In this qualitative analysis, we examine factors that yield such a concentration from the viewpoint that trade would be concentrated in the channel where transaction costs are relatively low compared with those in other channels. It is almost certain that weak law enforcement at the border gives rise to informal cross-border trade, which allows traders to save the time and costs for compliance with formal procedures. Apart from informality, unique institutional arrangements have been emerging spontaneously in the border area that can reduce transaction costs in a way compatible with formal trade, thus augmenting cross-border trade. Based on observations of thriving trade at Myanmar's border with China, we draw implications for the country's general trade facilitation measures.

Keywords: Myanmar, cross-border trade, informal trade, transaction costs of trade
JEL classification: O17, O53, F19

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