Experiential Analysis To Effect Of Foreign Trade On Economy In China

The relation between the foreign trade and economic growth and whether the foreign trade can improve the economic growth is always an important study topic for economic scholars. The scale of foreign trade is growing since the reformation and openness of China. However, as the biggest developing country in the world, like the other developing countries, China faces the same problem such as unreasonable import- export trade structure. It's necessary to inspect the trend of our term of trade (TOT) and performance of the import-export trade on economic growth.Though the scholars made much research about the export trade and economic growth, most of them ignore the importance of import trade. For terms of trade, most researches focus on the trend and reason of its change, seldom analyze the relation between TOT and the economic growth. So in this paper, we inspect the import, export and TOT at the same time, which is good for understanding the mechanism and performance of import-export trade to economic growth.In chapter 3, we first analyze the situation of foreign trade and trade dependence briefly. Result shows that as the increase of the trade dependence, foreign demand has become an important power for the economic growth. But compared to the commodity trade, our service trade needs further improvement. Secondly, we inspect the recent change tendency of TOT and find out that since the middle of the 1990s, TOT is deteriorating. The reasons for that are as follows: the unreasonable import-export structure; increase of import demand for advanced technology equipment and capital-intense products; vicious competition among the export enterprises; changes of the internal market condition; the high price of imported raw material and machines.In order to analyze the function of the import-export trade on economic growth under the current environment, we establish a VAR model; use Granger and impulse response to inspect the relation among the import increase rate, export increase rate, TOT change rate and economic growth increase rate. Result shows that the increase rate of the export promotes the economic growth; import increase rate has crowding out effect on the economic growth in short-term, but in long term, it can promote the economic growth; In short term, improvement of TOT leads to the quick development of import, but has little impact on export, and in long term, the improvement of TOT promote the increase of both export and import.In chapter 5, we introduce foreign trade multiplier, and establish a parameter model to inspect the impact of import-export on economic growth and leading impact of export. Result shows that our marginal import tendency is expanding, that is demand for imported goods and service is bigger and the demand for domestic goods is smaller. By the end of 2006, demand for domestic goods and service is more than 50%, and demand for imported goods and service is over 30%. That proves import has crowding out impact on domestic economy. On the other hand, export has apparent ELG on economic growth, but this impact is decreasing. We should not depend too much on export and need to enlarge the domestic demand.From the conclusions, we know though foreign trade makes great contribution to our economic growth, the performance of import-export trade changes a lot with the change of the domestic and international environment especially the deteriorating of the TOT. So we should adjust the foreign trade strategy; optimize the trade structure; ameliorate the terms of trade to promote the growth of economic.