International Trade and its Effects onEconomic Growth in China

International trade, as a major factor of openness, has made an increasingly significantcontribution to economic growth. Chinese international trade has experienced rapidexpansion together with its dramatic economic growth which has made the country to targetthe world as its market. This research discusses the role of international trade in China’seconomic growth. It starts with a review of conceptions as well as the evolution of China’sinternational trade regime and the policy that China has taken in favor of trade sectors. Inaddition, China’s international trade performance is analyzed extensively. This research thenevaluates the effects of international trade on China’s economic growth through examiningimprovement in productivity. Both econometric and non-parametric approaches are appliedbased on a 6-year balanced panel data of 31 provinces of China from 2002 to 2007. For theeconometric approach, a stochastic frontier production function is estimated and provincespecific determinants of inefficiency in trade identified. For the non-parametric approach, theDivisia index of each province/region is calculated to be used as the benchmark. The studydemonstrates that increasing participation in the global trade helps China reap the static anddynamic benefits, stimulating rapid national economic growth. Both international tradevolume and trade structure towards high-tech exports result in positive effects on China’sregional productivity. The eastern region of China has been developing most rapidly while thecentral and western provinces have been lagging behind in terms of both economic growthand participation in international trade. Policy implications are drawn from the empiricalresults accordingly....