International Trade and its Effects on Economic Growth in China
AbstractInternational trade, as a major factor of openness, has made an increasingly significant contribution to economic growth. Chinese international trade has experienced rapid expansion together with its dramatic economic growth which has made the country to target the world as its market. This research discusses the role of international trade in China's economic growth. It starts with a review of conceptions as well as the evolution of China's international trade regime and the policy that China has taken in favor of trade sectors. In addition, China's international trade performance is analyzed extensively. This research then evaluates the effects of international trade on China's economic growth through examining improvement in productivity. Both econometric and non-parametric approaches are applied based on a 6-year balanced panel data of 31 provinces of China from 2002 to 2007. For the econometric approach, a stochastic frontier production function is estimated and province specific determinants of inefficiency in trade identified. For the non-parametric approach, the Divisia index of each province/region is calculated to be used as the benchmark. The study demonstrates that increasing participation in the global trade helps China reap the static and dynamic benefits, stimulating rapid national economic growth. Both international trade volume and trade structure towards high-tech exports result in positive effects on China's regional productivity. The eastern region of China has been developing most rapidly while the central and western provinces have been lagging behind in terms of both economic growth and participation in international trade. Policy implications are drawn from the empirical results accordingly.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5151.
Length: 38 pages
Date of creation: Aug 2010
Date of revision:
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Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- F10 - International Economics - - Trade - - - General
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-11 (All new papers)
- NEP-DEV-2010-09-11 (Development)
- NEP-EFF-2010-09-11 (Efficiency & Productivity)
- NEP-INT-2010-09-11 (International Trade)
- NEP-TRA-2010-09-11 (Transition Economics)
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- Muhammad, Shahbaz & Saleheen, Khan & Mohammad, Iqbal Tahir, 2012.
"The Dynamic Link between Energy Consumption, Economic Growth, Financial Development and Trade in China: Fresh Evidence from Multivariate Framework Analysis,"
42974, University Library of Munich, Germany, revised 26 Nov 2012.
- Shahbaz, Muhammad & Khan, Saleheen & Tahir, Mohammad Iqbal, 2013. "The dynamic links between energy consumption, economic growth, financial development and trade in China: Fresh evidence from multivariate framework analysis," Energy Economics, Elsevier, vol. 40(C), pages 8-21.
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