Dynamic Gains Of Processing Trade: An Empirical Approach

Since the application of reform and open-up policy, processing trade has undergone a fast development in China and become the leading trade of China's foreign trade, which accelerated the development of our national economy.Processing Trade plays an important role in attracting FDI, improving technology, increasing employment and promoting the development of China's economy. Processing trade can attract a lot of FDI, offer plenty of job opportunities, train many skilled labors, enlarge international channel and bring advanced technology which enhanced domestic technology level through knowledge spillover, contagion and learning by doing effects. With plenty of historical data, various charts and statistic guidelines and based on logical reasoning and living examples, this paper deeply research the dynamic gains of processing trade, including multiplier, FDI, employment, technical advances, industry upgrading and human capital accumulation mechanisms. From the empirical results, we know that though China's processing trade has developed with high speed, there are still some problems existed. So it is important and meaningful to exploit and enlarge dynamic gains of processing trade.This paper includes six chapters. Chapter 1 makes an introduction and comment on documents and research reviewed. Chapter two mainly talks about the definition, characteristics and the current development of processing trade, which provides foundation for the study in the following chapters. Chapter 3 and chapter 4, which is the core part of the paper, mainly research various kinds of the mechanisms of Processing Trade, which influence economic growth. Moreover, this chapter has done empirical analysis on six channels of dynamic gains of processing trade based on the data from 1991 to 2004.When analyze each channel of the processing trade, we use the co-integrated method to analyze the degree of processing trade influencing economic growth of our country through multiplier, FDI, employment, technical advances, industry upgrading and human capital accumulation mechanisms. Based on the former chapters, chapter five and six put forward some congruent suggestions to promote the development of our processing trade.The main innovation of this paper is to probe the dynamic gains of processing trade through theoretical and empirical analysis and demonstrate the empirical results of the six channels by using econometrics.