A Study On The Relationship Between Foreign Trade In Services And Economic Growth In China

Since 1960s, the growth speed of international trade in services has been gradually becoming beyond that of trade in goods, meanwhile, it plays a more and more important role in the whole international trade.The paper focuses on investigating the relationship between China's foreign trade in services and economic growth. Firstly it analyzes the history and actuality of service industry and trade in services in China. Subsequently, it applies Granger causality test to China's foreign trade in services and economic growth. By constructing error correction model, it measures the co-integration relationships between china's service import & export and GDP. Then the paper tests whether there are causalities in short term or long term and the characteristics of these causalities. At last, it uses variance decompositions to test the intensity of the causalities so as to show up the significance of foreign trade in services to economic growth in China.The results show that there is the only co-integration relationship between service import & export and GDP; there is no bi-directional causal relationship between them. The paper proposes that, in long term, the net effect of service import & export on GDP growth is positive and service export is the cause of GDP; in short term, the influence between service import & export and economy growth is small. Therefore, on one hand, we should encourage service export vigorously so as to drive economic growth; on the other hand, instead of short-term policies, long-term policies should be adopted to hasten service export. Finally, the paper puts up some suggestions on further development of China's foreign trade in services.