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International Trade and its Effects on Economic Growth in China


  • Sun, Peng

    () (affiliation not available)

  • Heshmati, Almas

    () (Jönköping University, Sogang University)


International 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.

Suggested Citation

  • Sun, Peng & Heshmati, Almas, 2010. "International Trade and its Effects on Economic Growth in China," IZA Discussion Papers 5151, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5151

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    Cited by:

    1. 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.
    2. Imran Alam & Shahid Ahmed, 2015. "India- Saudi Arabia Bilateral Trade Relations: Recent Experiences and Future Opportunities," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 3(7), pages 327-342, July.
    3. Fan Duan & Bulent Unel, 2017. "Persistence of Cities: Evidence from China," Departmental Working Papers 2017-08, Department of Economics, Louisiana State University.
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    5. Dinkneh Gebre Borojo & Yushi Jiang, 2016. "The Impact of Africa-China Trade Openness on Technology Transfer and Economic Growth for Africa: A Dynamic Panel Data Approach," Annals of Economics and Finance, Society for AEF, vol. 17(2), pages 403-431, November.
    6. Sung, Bongsuk & Song, Woo-Yong, 2014. "How government policies affect the export dynamics of renewable energy technologies: A subsectoral analysis," Energy, Elsevier, vol. 69(C), pages 843-859.
    7. Gulzar Ali & Zhaohua Li, 2016. "Analyzing the role of Imports in Economic Growth of Pakistan; Evidence from ARDL Bound Testing Approach," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 6(9), pages 19-37, September.

    More about this item


    panel data; China; economic growth; international trade; stochastic frontier;

    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, Innovation, 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

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