.1995-2006 China's Terms Of Trade Changes

Terms of trade are major indicators that represent the gain of a country from the international trade. In this paper, the change of every ratio for the terms of trade in China between 1995 and 2006 is studied based on facts. The following findings have been concluded: the ratio of the gross barter terms of trade is falling constantly with fluctuation while the ratio of the income terms of trade is rising prominently with fluctuation; the ratios of the net barter terms of trade for primary products and industrial products both are falling while the ratio of income terms of trade is rising, the extent of which is larger than for primary and industrial products, so the change of terms of trade for industrial products is the major reason that leads to the change of the gross terms of trade of China; the single factor terms of trade for industrial products is improving dramatically and the double factors terms of trade of the major trading partner is also improving, but the "new double factors terms of trade" is deteriorating when the labor cost is considered.Based on the empirical analysis, this paper also examines the impact that various factors, such as economic growth, import/export structure, FDI, and imperfect competition, have on the terms of trade of China. For this, the type of our technology progress, the improvement of export structure, processing trade, and FDI development are the major causes for the change of the ratios of terms of trade.Considering the change of the ratios of terms of trade, the paper concludes that, the static trade interest achieved through international trade is growing, but the efficiency is reducing; compared with the static trade interest, our country gains much more dynamic trade interest. Foreign trade has become an important driving force for the growth of our economy, but the risk of "immiserizing growth" should be circumvented. At last, based on the influencing factors for the change of terms of trade, the paper suggests some countermeasures to improve our terms of trade and the foreign trade interest.