The Terms Of Trade And Economic Growth

The concept of the terms of trade has existed for a long time. Since the Prebisch - Singer thesis, the terms of trade became a centre concept for developing countries. In China it has been widely discussed in the 1980s, and recently scholars have also widely been interested. In recent years from the studies by scholars, the situation of China's terms of trade, especially NBTT, is not optimistic. Worsening terms of trade means the increasing trade losses, and the economic growth will face increasing pressure. With China's access to the WTO, with more and more dependence on foreign trade, and with more competitive international trade, we must consider how to rationally adjust trade policies and macroeconomic policies in order to facilitate more long-term rapid economic development. The terms of trade is undoubtedly an important reference.In recent years, although there are many researches by scholars on China's terms of trade, there are still some problems: (1) expressions about the economic meaning of terms of trade are inconsistent, and there are a lot of ambiguities; (2) in the calculation of our country's Terms of trade, the selected sample is too small, and the index of terms of trade may have a certain bias; (3) there are no clear calculations about our country's trade gains caused by changing of terms of trade. Based on the above, I believe that it is necessary to have a further study on China's terms of trade and relationship with the economic growth.In this paper, a total of five chapters, can be divided into four major parts. The first part is about the basic theory of the terms of trade. The basic meaning of the terms of trade were sorted and analyzed about the impacts from the FDI, trade policy and the exchange rate. These basic theories is to explore the terms of trade and the relationship with the economic growth. The second part is about the puzzledom of the terms of trade of developing countries. China is still a developing country, and China also must face the same puzzledom. So we should attach importance to it. The third part is about the relationship between the terms of trade and the economic growth. As the development of international trade, the relationship become increasingly close, and in-depth analysis on the relationship between them is what we must do in developing countries. The fourth part is the empirical research about our country's terms of trade and relationship with economic growth. Theory can not be divorced from reality, and empirical analysis can help us understand our country's terms of trade more deeply. The main part of the paper are the third and the fourth one.In the first part, firstly the paper sorted and analyzed the economic meaning of the terms of trade, and the basic conclusions of the paper are: (1) the meaning of the terms of trade reflects the dynamic changes of the trade gains rather than changes in static or relatively static; (2) terms of trade reflects not only the absolute change of a country's trade gains but also the relative change; (3) the terms of trade reveal one country's position in the international political and economic situation, it deserves attention. Secondly, the paper analyzes the impact of the FDI, exchange rate and trade policies on the terms of trade, and the conclusions are: (1) the impact of FDI on a country's NBTT is uncertainty; (2) there are no equilibrium relationship between the exchange rate and the terms of trade in long-term conditions, and there is a tendency to change by the same direction; (3) reasonable use of a variety of trade policy can be effective in promoting the improvement of the terms of trade and the increase of trade gains.In the second part, the paper expatiated the Prebisch-Singer thesis and theory of immiserizing growth, expand the immiserizing growth to the growth of the relative poor, and pointed out that the developing countries as a whole, their terms of trade remains deteriorating situation, which have a great impact on their economic growth, and which have became the main reason of the relative poverty in the whole world.In the third part, the paper analyzed the relationship between the terms of trade and the economic growth. Basic conclusions are: (1) in the modern economy changes in the trade gains which caused by changes in the terms of trade, have had an increasingly important influence on the economic growth of countries; (2) when a country's trade participation is low, the impact of terms of trade on economic growth is uncertain in the short-term; (3) the impact of trends in terms of trade on a country's economic development potential is enormous; (4) economic growth have an impact on terms of trade through the production effects and consumption effects; (5) in different mode of economic growth, the impact of the economic growth on the terms of trade is different.In the fourth part, the paper made empirical analysis about the relationship between our country's terms of trade and economic growth. Basic conclusions are: (1) the NBTT have a overall deteriorated trend, and NBTT of primary goods and labor-intensive or resource-intensive goods deteriorated in a overall trend, but the deteriorated trend of NBTT of capital-intensive or technology-intensive goods is not significant; (2) the main reason of NBTT's deteriorated trend came from the deterioration of labor-intensive or capital-intensive goods in our country, and NBTT of capital-intensive or technology-intensive goods eased the overall trend of NBTT; (3) changes of FDI and economic growth have played a significant role on China's NBTT, and impact of the trade structure is not significant; (4) both our trade losses and fluctuations of NBTT are great, but their impact on China's economic growth are not significant.From the paper's analysis, there are a few points that deserve our attention: (1) The puzzledom of developing countries in the terms of trade exists, and it is difficult to eliminate. Despite China's rapid economic growth, it is still hard to escape the puzzledom of developing countries in terms of trade. (2) Although the deterioration of NBTT of primary goods was serious, it did not pose a significant impact on China's economic growth for China's trade structure had been upgrading. The deterioration of NBTT of labor-intensive or resource-intensive goods played a leading role in the deterioration of overall NBTT. Fluctuations of NBTT of capital-intensive or technology-intensive goods are serious, which are both hidden danger for our economic growth. (3) China's economic growth and NBTT changed in the reverse directions, and it means that the trend of deterioration will continue, and trade losses will enlarge as the economic growth. (4) Despite the increase in FDI flows helps to ease prices deterioration in NBTT, it is difficult to determine the reasons. For our country has already become the largest FDI inflow country, to ease the deterioration of NBTT relying on the increase in FDI inflows is not realistic.What is gratifying is that the impact of our NBTT's deterioration and fluctuations on the economic growth is not significant. On this point, our country is different from many other developing countries, mainly because over the years our country has maintained rapid economic growth. From the viewpoint of economic growth, we can see the deterioration of NBTT as the cost of growth, and this cost is still at least within the scope we can take. As China's overall national strength further enhanced, and the development of scientific and technological progress, we may reverse the situation and reduce the cost. This also requires us as soon as possible to perfect the market economic system, speed up scientific and technological progress and independent innovation, improve the government's macro-economic management capacity, it is the only way to achieve the goal of catching up, and to achieve long-term goal of socialism as soon as possible.