Researches On The Effects Of Economic Growth Of Free Trade Areas In China: Theoretical And Empirical Study

The driving force of economic growth is always a hot issue in the field of economics, especially in the period of weak economic growth. In the context of the gloomy global economy, every economy is trying to find the new driving force and growth pole in order to stimulate economic recovery. Due to the tough recovery of global economy and the deficiency of three domestic traditional driving forces, our economy has entered a period of the new normal, with an important characteristic of changing economic growth rate from high-speed to medium-speed, and a continuously increasing economic downward pressure year by year without a sign of recovery. Therefore, it is so urgent to search for a new driving force for our economy. The paper, focusing on the Free Trade Areas concerned and debated by every economy during the world’s fifth wave of regional economic integration, studies, from the perspective of FTAs, comprehensively the economic growth effects of FTAs in our country both in theory and practice, tries to catch the actual effect of FTAs on our economic growth, and verifies whether the FTA is a new effective driving force to the economic growth, in order to offer advice for decision-making to foster new economic growth point of our country.The paper is mainly analyzed from the theoretical and empirical perspectives. Firstly, the paper analyzes theoretically the economic growth effects of FTAs. On the basis of literature review and theory evolution, the paper builds the mathematical model with the aid of previous researches, and puts forward the static and dynamic mechanism of economic growth driven by FTAs. The results of the mathematical model indicate that if the scope of trade liberalization of FTAs including two countries is restricted to the final goods, FTAs will have negative effect to each member. But FTAs will promote economic growth on the condition that the liberalization and facilitation of the final goods and intermediate goods have been enhanced together. Especially, the liberalization and facilitation of the final goods and intermediate goods are all involved in FTAs constructed by our country. While the analysis of the mechanism demonstrates that FTAs will have a positive impact on economic growth by means of one or more static and dynamic mechanism, including the trade bonus mechanism, the welfare effect mechanism, the investment bonus mechanism, the mechanism of scale effects, the competition effect mechanism, and the technology effect mechanism. The mathematical model and the mechanism not only clarify how the FTAs drive economic growth, but also lay a firm theoretical foundation.Empirical analysis used in the paper includes descriptive statistics, the gravity model and GTAP. The function of the first two methods is ex-post verification, the last method is ex-ante simulation. The economic growth effects of FTAs signed are studied by using the methods of descriptive statistics and the gravity model. The results of descriptive statistics suggest that FTAs signed have different positive influence on foreign trade, foreign direct investment, and foreign economic cooperation (mainly foreign contracted projects). The empirical results of the modified gravity model and economic aggregate expanded model show that FTAs signed with economically advanced FTA partners, less developed ones and all ones have different positive effect on China’s economic growth. For FTAs under negotiation and under research, the paper employs the GTAP model to simulate the economic growth effects of China’s FTAs. All the results show that if these FTAs are signed, they will have positive effect to our country’s foreign trade, economic aggregate, and social welfare, and drive the economic growth of our country through the growth of foreign trade, the expansion of economic aggregate, and the improvement of the level of social welfare. However, the driving force to our country is not the largest, compared to other FTA partners in the same FTA. Furthermore, whether it is under negotiation or under research, it is sure that the more the number of signed FTAs, and the higher the level of trade liberalization and facilitation, the greater the driving force to our country’s economic growth. But after the FTAs under negotiation are signed, there maybe have negative effect to the term of trade of our country, while after FTAs under research are signed, there is no obvious evidence to show negative effect.The paper not only perfects, summarizes and comprehensives the analysis angle of economic growth driven by FTAs in the aspect of the research perspective, but also, because of theoretical and empirical analysis, has possible innovation in the aspects of the research contents and conclusions. The paper comes up with the new concept and new wording based on theoretical and empirical analysis, namely "economic growth driven by FTAs", which is the most important marginal contribution of the paper. Moreover. "FTAs driven" also revises the traditional ideas of the three important factors to push forward the economic growth.In addition, considered research conclusions and the general direction of development of our country’s FTAs, the paper proposes some policy suggestions, as adhering to the five principles of development, holding regional layout of "one body and two wings", making full use of the existed foundation, optimizing the contents of negotiation with the times, leading the new system formulation of global economy and trade, and developing FTAs with "Two-wheel driven", aiming at playing the effectiveness of "economic growth driven by FTAs" better.