| Abstract | The domino effect of regionalism was first coined by Bladwin (1993), This paper, however, intends to formalize this idea by setting a four-country (US, China, TPP countries and the rest of the world) model. To investigate how China strategically responds to different trading regimes, we find some evidence for the domino theory. Our result shows that the establishment of the TPP will decrease China's producer profits. To redress the negative effect imposed on it, China is able to choose among three strategies: joining the TPP, forming a FTA with other TPP countries, or forming a FTA with the rest of the world. The results suggest that China is willing to form its own FTA with the rest of the world rather than getting involved with other TPP countries. However, though joining the TPP brings to the largest welfare, China would like to take its own initiative. |