Being the world's largest developing economy, China's successful economic performance since 1978 has had a powerful impact on the global economy. Its open policy features with an evolutionary process, involving the gradual liberalisation of foreign exchange, international trade and foreign...

In the paper, an analytical framework with both increasing returns and transaction costs is developed to investigate the general equilibrium with endogenous specialization and division of labor. In this framework, each individual's optimum decision in choosing her pattern of specialization is...