The Political Economy Analysis Of Export And Foreign Direct Investment In China

In recent years, few developments in international economics have elicited more interest or stirred more controversy than the sudden emergence of China as a trading nation and manufacturing center. Nevertheless, a number of economists have recently called into question the sustainability of China's current rates of GDP and export growth. These observers have tended to point out the shortcomings of China's "socialist market economy" and these will constrain economy growth in the future.Branstter-Feenstra(1999)developed a model drawing on Grossman and Helpman (1994,1996) to derive an empirically estimable government objective function. The key structural parameters of this model are estimated using province-level data on foreign direct investment and trade flows in China over the year 1984-1995 .They find that contrast to U.S the Chinese government has given too much protection to domestic industry which mainly are reflected by the weight applied to consumer welfare and the output of state-owned enterprises.This paper expands the model based on their research. Using the province-level data on foreign direct investment and trade flows in China over the year 1996-2004, I find Chinese market is more open than before after ten years reform and entering the WTO, because the weight applied to the state-owned enterprises contrast to the weight applied to the consumer welfare decreases from 3.8-6.8 in 1984-1995 to 0.92-1.1 in 1996-2004. But contrast to the west, the Chinese market is still far from open.Based on analyzing these unstable factors , This paper suggests the direction of improvement and predicts China's economy growth in the future.