The Determinants Of Chinese International Service Trade

Service trade is becoming the key of the global economic competition, as a large trading power, china has a low proportion of international service trade. Especially, it is worth noting that large deficit in Chinese service trade indicates weak ability in international competition. The masterstroke of this paper is analyzing the determinants of Chinese international service trade. We take the total volume of trade, value of import and export as dependent variables to estimate the extended Gravity Model. After a comparative analysis on the influence of each determinant, we propose some suggestions for improving the international budget of China's service trade.Through analysing the pattern of Chinese service trade, we extend Gravity Model on the framework of Monopolistic Competition and introduce the factors such as industrial structure, size dispersion and trade cost. Then we build three different models for total volume of trade, import and export, then estimate and revise the models using data of Chinese bilateral service trade.Through empirical analysis, we found every factor has different influence in three models. The variables including GDP, Distance and APEC were found to be significant in every model, which is consistent with the theory. However there is some deviation on other factors. first, improvement of ICT application level can promote export of service, but has no effect on import, which shows that ICT is more important on improving supply capability of service. Unfortunately, Chinese ICT doesn't have significant influence to its service export. Second, the increasing of production value in Chinese service industry can't improve service export of China significantly. Third, size dispersion index is significant, but its coefficient is relatively small. Through analysis we found that Solow Paradox in Chinese ICT application, defects of industry structure and no obvious trend of intra-industry service trade are the main reasons which obstruct the development and increase of Chinese service export.In the end of the paper, we propose suggestions as follows: improve popularization of ICT to reach the critical point as soon as possible; speed up the development of producer service so as to optimal industry structure; improve international competition of service trade resorting to technical progress and industry upgrade.