Impacts Of International Trade Of Gricultural Products On China’s Economic Growth

Since China carried out its reform and opening up policy and especially since it joinedWTO in2001, China has become one of the major trading nations of agricultural products inthe world. With numerous imports and exports, it is inevitable that international trade deficitsof China’s agricultural products will occur. However, with China’s agriculture and the wholeeconomy sharing benefits of global economic integration, they also have to meet the impactsof fierce market competition, price spread and industrial restructuring triggered by it. Thestudy puts international trade into an economic growth system including agriculture and itsassociated industry, constructs a theory framework from partial equilibrium to generalequilibrium, and explores the pathways and contributions of the effects of international tradeof agricultural products to China’s economic growth.Based on the theories of international trade and economic growth, the study constructsthe theory framework of the impacts of international trade of agricultural products on China’seconomic growth. Firstly, according to the development of international trade of China’sagricultural products, the study comprehensively and systematically describes itscharacteristics and analyzes the causes of the trade deficits in order to judge the future ofinternational trade of China’s agricultural products. Secondly, the pathways of the impacts ofinternational trade of agricultural products on China’s economic growth are explored both inthe short and long term. Thirdly, based on the above testing and analysis, the study establishesmodels to comprehensively evaluate the contribution of international trade of agriculturalproducts on China’s economic growth. Finally, according to the conclusions obtained,suggestions are put forward.Since2004, a historic reversal from “surplus” to “deficit” in China’s agricultural tradebalance has occurred and the deficits have continued to expand and seem to be along-standing trend. Empirical analysis shows the total deficits are determined by tradeimbalance of bulk products, such as soybean, cotton, and vegetable oils characterized by thehigh concentration of the sources of the imports of main deficit agricultural products. It can befound through the CMS model decomposition including demand, structure andcompetitiveness (gravity) that the exports of China’s agricultural products grow slowly owingto the effects of the competitiveness and structure. But comparatively speaking, because of better domestic economic environment, the importing gravity of agricultural productsincreases heavily, and the rate of the imports is much larger than that of the exports, and it isinevitable that a deficit will come into being. Therefore, the trade deficits of China’sagricultural products will be an irreversible trend in the short term.In short terms, the international trade of China’s agricultural products affects domesticprice through price transmission and spread. The increase of both imports and exports ofagricultural products stimulates the rise of the domestic agricultural product price. With theimports and exports of agricultural products rising by1%, the price of China’s agriculturalproducts increases respectively by0.7355%and by0.4198%. The increase of China’sagricultural product price directly leads to the increase of CPI, through which PPI rises. Inshort terms (in six months), there will be a major impact of the agricultural product price onCPI, with the contribution of44.9%. The contribution of the agricultural product price to PPIis relatively stable, with13.07%within six months. A rough calculation shows that with theimports and exports of agricultural products rising by1%, the contribution to CPI will berespectively0.3303%and0.1885%, and the contribution to PPI will be respectively0.0961%and0.0549%.The international trade of agricultural products not only directly affects China’sagricultural structure and agricultural growth, but also indirectly affects secondary industryand tertiary industry through industry associations, leading to the structural adjustment effectson the three industries. Granger causality tests show that the exports and imports ofagricultural products improve agricultural total factor productivity through the optimalallocation of resources and technology diffusion, thereby affecting the China’s agriculturalgrowth. The international trade of agricultural products not only provides power and space forChina’s agricultural structure adjustment, but also indirectly affects China’s three industrialstructures through agriculture and the associated industries. Empirical results show that theinfluence of expansion of imports and exports of agricultural products is different to differentindustries. On the one hand, the exports will reduce the share of primary industry, increase theshare of tertiary industry, and affect negatively, but not significantly, the share of secondaryindustry; on the other hand, the imports will increase the share of secondary industry, reducethe share of tertiary industry, and affect positively, but not significantly, the share of primaryindustry.In the short term, the effects of agricultural product price transmission and spread areconducive to promoting China’s economic growth. Conclusions of simultaneous equationsshow that the exports and imports of China’s agricultural products will lead to the rise ofdomestic agricultural product price, directly causing the rise of CPI and inhibiting economic growth. Meanwhile, the exports and imports of China’s agricultural products indirectly causePPI to rise ever higher through the impacts of CPI on PPI, which will stimulate economicgrowth. At present, national income will increase by0.1%with agricultural product pricecaused by international trade rising by1%.But, in the long run, the functions of the structure adjustment of the international trade ofagricultural products not only affect the output efficiency of capital and labor, but also inhibitChina’s economic growth. Firstly, the exports and imports of agricultural products help topromote China’s agricultural growth. Both the labor-intensive exports of agricultural productsand the land-intensive imports of agricultural products have contributed to China’sagricultural growth, but the latter is of more significance. Secondly, the increase in the exportsof agricultural products will significantly promote the increase of the share of China’s tertiaryindustry, significantly promoting the economic expansion and the output efficiency of capital,but inhibiting the output efficiency of labor. An increase in the imports of agriculturalproducts will significantly expand the share of secondary industry and reduce the share oftertiary industry, which will both lead economic scale to shrink, and inhibit capital outputefficiency while promoting labor output efficiency. By comparison, it shows that the deficitpattern of the international trade of agricultural products will curb China’s economic growth.To sum up, the trend of the international trade deficits of China’s agricultural products isirreversible. In view of its possible negative impacts on China’s agriculture and economicgrowth, it becomes an important goal to keep a moderate scale level and a reasonablestructure of the trade deficits of China’s agricultural products. Firstly, it is necessary toincrease the investment of technology in agriculture and promote the development ofagricultural industrialization in order to ensure the balanced development of internationaltrade. Secondly, it is required to improve the circulation modes of agricultural products,reduce their transaction costs, clear the ways of price transmission, raise the efficiency of theinternational trade and expand the trade profits of agricultural products. Besides, it is alsoimportant to establish the capital and technology foundations for the development ofagricultural industrialization, and continuously improve the comprehensive productioncapacity and international competitiveness of agriculture by promoting the optimization andupgrading of economic structure.