Analysis On Impacts Of China Foreign Trade On Income Distribution Gap

Since the reform and opening up of China, rapid economic development has attracted worldwide attention, at the same time China's foreign trade has also made great achievements. China's foreign trade increased from about 20.64 billion U.S. dollars in 1978 to 2,972,760,000,000USD in 2010. China has become a veritable a big trading country while currently China's total amount of imports and exports ranks second in the world, and meanwhile its total amount of exports ranks first and occupied close to 10% global foreign trade share. In addition, China's foreign trade dependence increased greatly along with the substantial growth of the volume. In 1978, China's foreign trade dependence was only 9.9%, and it peaks in 2006 at 65.2%. Although affected by the financial crisis and the appreciation of the RMB, foreign trade dependence has a slight decline. In 2009, the dependence remained high of 44.2%.Opening up policy significantly raise Chinese average income but it also broaden the income distribution gap. And the gap is revealed in multiple aspects, including between urban and rural, among regions and industries. According to the National Bureau of Statistics of China, China's Gini coefficient in 1995 was 0.389 and in 2007, it was 0.47. This number is still in growth in the recent four years. the data is still expanding. According to Chinese Academy of Social Sciences survey, this data is close to 0.5. The World Bank believes China is the one with biggest Gini coefficient growth. GDP of the richest region in China is 20 times of the poorest region and that is the same situation between the richest and poorest country. In addition, the ratio of urban per capital income to that of rural is 2.9, and the ratio is 3.2 in 2005. In 2008, urban-rural income gap had widened to 3.4:1 with the absolute gap more than 10,000 Yuan for the first time. And in 2009 the proportion of urban to rural incomes remains high as 3.3:1.In addition, the difference between wages of workers in different industries is rapidly widening. The wage extreme ratio between industries increased from 2.17 times in 1978 to 4.77 times in 2008. While the ratio is about 1.5 among developed countries and about 2 to 3 times among developing countries.As foreign trade and income gap in China showing the correlation, this main purpose of paper is studying the impact of the foreign on the income gap. Firstly this essay uses the traditional theories to analyze the foreign trade's influence on the income distribution, and then concludes the mechanism of this kind of influence. Secondly, based on the status of the development of China's foreign trade and the widening trend of domestic income distribution gap, the essay uses econometric model with relevant data to verify the relationship between foreign trade and income inequality in China. Finally, according conclusion from theoretical analysis and empirical analysis, the essay provides the way of decreasing the income gap of China.