Research On The Relationship Between Chinese Foreign Trade Structure And Industry Structure

Industry structure and foreign trade are important factors influencing the quality of economy of a country.Since the reform and opening,the economic aggregate of China keeps growing at high speed,but the economic structure has not developped well enough.The imbalance of economic structure has become a decisive factor restricting the sustainable development of China’s economy.After 2011,China has experienced serious over production.The traditional aggregate stimulating policy can not solve the problem of over production and unsustainable development.It needs structural adjustment.For China,structure adjustment is mainly concerned with internal industry structure and foreign trade structure.We should first understand the relationship between industry structure and foreign trade structure before considering structure adjustment.And we should find the law of the mutual effect between industry structure and foreign trade structure from the fact of China’s economic development.So we can make reasonable policies.The current study is just concentrating on industry structure or trade structure separately.This makes it difficult to find the law between trade structure and industry structure of China and hard to understand the problems in the two structures.Based on the previous reference,this paper discusses the mechanism of the mutual effect between industry structure and foreign trade structure systematically and analyzes the development and mutual effect between them historically.Using provincial panel data,series data and structure effect,empirical tests have been made to find the relationship between foreign trade structure and industry structure of China.Finally,the paper proposes policies to optimize and upgrade the foreign trade structure and industry structure of China.The following is the main contents of the paper.First,the paper gives a review of the theoretical basis of foreign trade structure and industry structure and analyzes the international trade theory from the perspective of industry structure.The paper also discusses the mechanism of mutual effect between foreign trade structure and industry structure,based on the principle of which foreign trade structure is decided by industry structure and has counteraction to industry structure.Second,the paper analyzes the historical development of industry structure of China according to the changes of the shares of three industries and describes the historical development of foreign trade structure according to the changes of the shares of primary products and manufactured products.We find that the changes of the industry structure of China is almost consistent with the general law of industry structure evolution.And the share of agriculture in total GDP is not proportional to its share of employment.This indicates obvious dual economical structure in China.The foreign trade structure has always been optimizing,but it often does not match the industry structure.Third,manufacturing is the foundation of the development of industries for a country.The paper takes manufacturing as an example to test the international competitive power of industries of China.Empirical study shows that the competitive power of manufacturing of China is relatively weak and that those with strong competitive power lie in industries of high energy consumption or heavy pollution.The electronicmechanic products with the highest share in exports just show weak international competitive power.Manufacturing of the middle and high level almost does not show international competitive power.This means that China has a lot to do before becoming a nation of powerful competitive manufacturing.Fourth,empirical research is made to test the relationship between foreign trade structure and industry structure by using econometric tools.The empirical test,based on provincial panel data,shows that export has a positive effect on the upgrading of industry,but import has no effect on industry structure statistically.Domestic demand(including asset investment and domestic consumption)has much larger power in the upgrading of industries than external demand and FDI.This means that domestic demand is the main power in upgrading industries.It also implies that too much dependence on the use of comparative advantage is not helpful to the upgrading of China’s industries and more reliance should be given to domestic demand in considering future policy making.The empirical test,based on time series,shows that the first industry(agriculture)has no close relationship with foreign trade.Export of manufactured products helps the development of the second industry but prevents the development of the third industry.Import of primary products and manufactured products show no effect on the upgrading of the second industry statistically.To upgrade industry structure,we should export less primary products and more high added-value manufactured products.Empirical test based on structure effect shows that the changes of export and import are the Granger cause of industry structure,but the change of industry structure is not Granger cause of the change of foreign trade structure.Fifth,the paper analyzes the signs and causes of the imbalance of the industry structure and foreign trade structure of China.We conclude that the fundamental cause of the imbalance of industry structure and foreign trade structure is that China has relied too much on comparative advantage according to theory and history.The imbalance of foreign trade mainly lies in the imbalance of the structure of subject,object and benefit of trade.The imbalance of industry structure mainly lies in excess production capacity.Sixth,the paper proposes that China should not completely follow the law of comparative advantage in the participation of international labor division.To upgrade the industry structure and foreign trade structure,the first thing China should do is to give up the development strategy of comparative advantage and choose alternative import-substitution strategy.China also should protect the internal market and replace the comparative strategy with competitive strategy,and then the imbalance of industry problem and trade problem can be solved.