Trade Openness, Linkage Spillovers And Economic Growth In China

Economic globalization and regional economic integration are the trend of world development nowadays. Then opening up is an important prerequisite for a country's economic development. During 30 years'reform and opening up, our economy has achieved a rapid development. Some outstanding features which appear in economic development have drawn extensive attention in the academic community. First, foreign trade and foreign direct investments develop rapidly; second, trade openness has a more obvious effect on China's economic development; third, technical progress has become a key factor in a country's economic growth in the long term. The report of the 17th conference of the Party explicitly pointed out that"we need to expand the width and depth of opening up and improve the level of an open economy". Based on this, this paper is going to do a research on the relationship between trade openness and our country's economic growth and the mechanism that trade openness promotes our country's economic growth through linkage spillovers.Firstly, a codification and integration has been made about the studies of measurement of trade openness and the relationship between trade openness and economic growth home and abroad. There are common defects existing in kinds of indicators about trade openness. As regards to the relationship between the trade openness and economic growth in theory, many scholars share similar opinion. However, they differ in conclusions made through empirical studies. Although using the ratio of dependence on foreign trade to measure trade openness gives rise to great controversy, the research made in this article suggests that the ratio of dependence on foreign trade is still a preferable indicator to measure the degree of our country's trade openness. Since reform and opening up, China's economic growth mainly depends on the factor inputs. Moreover, trade openness promotes China's economic growth by improving the factor productivity. Therefore, to strengthen the impact of human capital accumulation, trade openness and technology on our country's economic growth is the key to maintain the long-term economic growth in our economy henceforth.Secondly, factor inputs (especially capital inputs) are the main driving force for China's economic growth, and government expenditure (especially in recent years) is one of the major sources for capital inputs in our country. So in this paper the government expenditure is specified into seven categories to examine the relationship between trade openness and our government expenditure and to point out that the relationship mentioned changes according to the different functions of the government expenditure. At present, our government expenditure is still focused on the construction projects which are conductive to expand consumption and wages paid to the public service provider and other inputs. While inputs to education, social security, social welfare and so on are relatively insufficient. It weakens the government's macro-control function and power to some extent. At the same time it is not beneficial to the sustainable development of economy under open circumstance.Thirdly, this paper further analyzes that the trade openness (import and export trade) promotes our country's technological improvement, enhances our country's regional technological innovation ability and then promotes China's economic growth mechanisms through linkage spillovers. Using the Panel data of 17 manufacturing industries in China and their imports and exports to 16 OECD countries and 1997's and 2002's input-output tables, this article investigates the forward and backward linkage spillovers in our import and export trade companies. The study shows that China's export trade enterprises bring out positive backward linkage spillovers by purchasing semi finished products and services from the non-export trade enterprises of the upper industries. And import trade enterprises bring out positive forward linkage spillovers by purchasing semi finished products and services from the non-export trade enterprises of the downstream industries. While in import and export trade enterprises, the horizontal linkage spillovers are not obvious. Because of the differences in the structures of import and export among our country and the United States, Japan, Korea and other OECD country, there are apparent differences in linkage spillovers among our country and the enterprises in theses counties or economies.By constructing the input-output function in R & D activities and empirical examining the effect that the import and export trade brings to China's regional technological innovation ability, the study proves that: import and export trade has a positive impact on our country's regional technological innovation; import and export trade has become an important factor to raise regional innovation ability. Due to the imbalance development of import and export trade in different regions of our country, the impact of import and export trade on our country's regional technological innovation is strongest in the east regions, central regions less, western areas least. Imbalance in regional economic development leads to non-equilibrium in theirs' research and development abilities. Different R&D input structures in various regions give birth to different effects of R&D input to the technological innovation in those regions. At the same time, for the reason that China's R & D inputs and researchers fail to combine effectively; our country's regional R & D investment has not been fully and effectively utilized.