Study On The Effect Of Transmission Mechanism Of Financial Crisis On The China’s Export Trade Of Textiles

Since the outbreak of the financial crisis in2008, China’s textile industry has faced increasing prominent problems. China’s textile industry is under enormous pressure of the global economic recession, the appreciation of the RMB and the increased cost of raw material. In2008, the growth rate of China’s textile export has been reduced to the lowest level since January2003which leads to a direct negative impact on the development of China’s textile economics. From the point of view of the structure of the export products, China’s export trade, benefited from traditional labor-intensive products, exhibited relatively strong stability under the background of international financial crisis. The traditional labor-intensive products were not only the most internationally competitive, but also a significant share. Therefore, the study of the conduction from financial crisis to the textile export trade is essential.Firstly, according to the classical theory in economics, this paper elaborates the conduction mechanisms of the financial crisis and the adverse results on the Chinese textile export trade. The research is from five conduction path:Income Effect、Exchange Rate Effect、Policy Effect、FDI Effect, then establishes VAR model to analysis the impact of the financial crisis on the scale of Chinese textile export trade. This paper uses the granger causality, test specification、impulse responses and vector auto regression estimate to study the conduction effect of the financial crisis and examine the interaction of these variables in the financial crisis. The study found that long-term lagged effects of income on textile exports is most positive, which concluded that the overall decline in revenue in the world is the main reason for the contraction of China’s textile exports. The final part of the paper gives suggestions to prevent crises from the aspect of country and enterprises.