Spatial Spillover Effects In Economic Growth Between China And ASEAN

With the deepening construction process of China and ASEAN Free Trade Area(CAFTA),the linkages between bilateral economic cooperation become more and more close.Under an open economy circumstance,the interactions between China and ASEAN members'economic growth,namely the economic growth spatial spillover effect gets increasingly attention from researchers.At the same time,international trade and investment acted as the two basic modes for cross-border resource allocation and they are the two most important channels for the transmission for regional economic growth spillovers.Therefore,it is an to important subject to identify whether there exists a significant spillover effect in China and ASEAN members' economic growth,and to what extent bilateral trade and investment can be severed as the trans-missive mechanism of that effect,as well as their mutual relations.Traditional literature studies the issues of spillover effect in economic activities mainly through time series analysis approaches.The main drawback of this approachis that it does not effectively identify the interactive relationship of economic growth from certain economic entities that is whether it is time-series fluctuations incurred by capital markets linkages,or the transmission of spillovers from real economic growth through trade and investment mechanisms.Therefore,it is necessary to identify the spatial spillover effect of economic growth between China and ASEAN through spatial econometric approaches,which is designed for the analysis of spatial dependence and heterogeneity of economic activities.At the same time,with the deepening process of economic globalization,international division of labor as well as the development of multinational corporations,the relationship between international trade and international direct investment become more and more complex,demonstrating both substitution and complementary trends.Therefore,to grasp the spillover effects of economic growth between China and ASEAN,it is necessary to analyze bilateral trade and investment which mechanism is playing the core role in spillover effects of economic growth among FTA members.The existing researches have yielded fruitful conclusions in revealing the relationship between bilateral trade and investment among China and ASEAN members,but there are still many problems to be further studied.At present,the study on the effect of bilateral trade and investment on the economic growth among members of CAFTA is often based on different frameworks.Scholars focus on discussing the single mechanism,namely the impact of trade or investment on the economic growth of above countries.However,integrating international trade and investment into a unified analytical framework can provide a comprehensive analysis of their combined effects on economic growth.In this paper,we explore the alternative or complementary relationships between trade and investment among China and ASEAN members through modeling bilateral trade,investment and economic growth into a unified framework and the joint gravitational equations analysis approaches.Firstly,this paper briefly review the theoretical trans-missive mechanism of the economic growth spatial spillover effect,that is,how the relevant international trade theory and international direct investment theory can explain the interactions for different country's economic growth.Secondly,by establishing the spatial econometric model and the joint gravitational equations models for bilateral trade and investment,this paper aims to study the spatial spillover effects of economic growth between CAFTA nations,as well as the specific transmission mechanism and the alternative and complementary relationship between trade and investment mechanisms.The study found that:(1)There exist a strong positive spillover effect for economic growth within CAFTA members.(2)Bilateral investment and trade between China and ASEAN countries are the core trans-missive mechanism for economic growth spatial spillover effect.At the same time,the multiplier for economic growth from trade mechanism is significantly greater than that of the investment mechanism.(3)As for the specific trans-missive mechanism of the spillover effects of economic growth between China and ASEAN countries,there is a highly complementary relationship between the binary mechanisms between trade and investment.However,there is an alternative interaction within the single mechanism for trade or investment.To be more specific,there exist a serious competition and substitution relationship between China's exports to ASEAN versus ASEAN's export to China,which can be significantly explained by bilateral intra-industry trade.And ASEAN,s investment to China demonstrates strong complementary relationship versus China's exports to ASEAN,which is mainly induced by the flow of ASEAN's investment to China's processing and manufacturing industry.Therefore,considering the positive interaction between ASEAN and China's economic growth,it is necessary to build ASEAN as a bridgehead for China's all-round opening strategy.We should give ASEAN countries the first priority in cooperation in fields like policy docking,project construction and financial support.To further promote the construction process of the existing China and ASEAN Free Trade Area,the key point is to speed up the implementation of bilateral trade and investment facilitation policy so as to achieve the mutually beneficial and win-win development between China and ASEAN countries.