Empirical Analysis On China's Terms Of Trade (1981-2004)

NBTT has been thought as an important indicator to measure the gains from trade. Butthe analysis shows that it is necessary to put NBTT, volatility of NBTT, ITT and FTT togetherto consider in order to comprehensively measure the gains from trade. Based on empiricalanalysis on China's terms of trade from 1981 to 2004, it is found that: Firstly, the trend ofgross NBTT declines in the fluctuation. The trend of NBTT of primary goods is not obvious.The NBTT of capital/technology intensively manufactured goods has been downward since1993. The NBTT of labor/resource intensively manufactured goods has been downward since1997. Secondly, the upward trend in the gross ITT is apparent. The trend of ITT of primarygoods rises in the fluctuation. The ITT of both capital/technology intensively manufacturedgoods and labor/resource intensively manufactured goods has been apparently upward since1990s. Thirdly, there exists an apparently upward trend in the SFTT of manufactured goods.Among the major trade partners of China, the DFTT between China and US/Japan declinedbefore 1990, but there exists an apparently upward trend after 1990. The factors affecting the changes of terms of trade will also affect the gains from trade.Based on theoretical analysis on factors affecting the changes of terms of trade, the empiricalanalysis finds that: Firstly, three common factors can be extracted by factor analysis. The firstcommon factor is technology progress. The second is trade policies affecting the changes ofterms of trade. The third is price elasticity of export demand. Secondly, according to SAS'sbackward elimination method, the regression of NBTT on four factors finds that: Thecoefficient of labor productivity is negative. The coefficients of price elasticity of exportdemand, tariff and FDI are positive. Thirdly, the results from NBTT decomposition find that:There actually exists a long-term tendency of deterioration in NBTT. The trend of volatility ofNBTT presents to be downward. The volatility of NBTT is mainly due to "country priceeffect". There has been a debate on whether there exists immiserizing growth in China's foreigntrade. This paper empirically studies this question from three aspects: Bhagwati'spreconditions, terms of trade and international industry competition. It finds that there doesn'texist immiserizing growth in China's foreign trade.