An Inquiry To China's Import Potentiality And Trade Balance

Many problems have been caused by China's trade surplus and imbalance, such as the unceasingly growing foreign exchange reserves, the trade frictions and the appreciation of RMB. These problems have drawn much attention from every circle of our society. Some scholars believe that surplus can be reduced by expanding domestic demand and increasing imports. But how to expand domestic demand and imports and how big the potentiality is? This paper aims to solve these problems by analyzing the influential factors, forecasting the potentiality and making clear the possible contribution that expading domestic demand and imports do to reduce trade surplus.In this paper, the classical theories of international trade are used to probe into the reasons on the substantial increase in imports and trade imbalance. The factor analysis and measurement method are used to selecte major factors, so as to establish an econometric model on multi-factors affecting imports. Methods of cointegration test, EG two-step method and least squares are also used to make computation analysis and forecast the status and the potentiality of imports; we aim to ravel the influential factors of imports and the potentiality of expanding domestic demand and imports.Therefore, the following contents are arranged in this article: In addition to chapterⅠ-Introduction, chapterⅡintroduces China's foreign trade development, points out the problems on China's too large trade surplus and imbalance. ChapterⅢdiscusses the main factors that cause trade imbalance, finds out the most important factors and sets up a measurement model to work out imports potentiality. ChapterⅣbrings forward the strategic direction on expanding import and realizing trade balance. ChapterⅤis about the international experiences and indoctrinations on realizing trade balance. ChapterⅥbrings forward the countermeasures on digging out China's imports potentiality from the perspective of expanding domestic demand. ChapterⅦis about the conclusions and discussions.To summarize this paper, we can get the main conclusions as follows:(1) Theoretical analysis shows that: imports not only have a direct impact on the trade balance, but also play an important role on changing the mode of economic growth and promote economic growth. It can expand consumption, develop new consumptive hot spots, as well as adjust exports scales.(2) The main factors affecting imports and trade balance are exports, foreign direct investment, and ultima consumption rate. These factors play different roles: the most important factor is export, followed by final consumption and foreign direct investment.(3) The actual use of foreign capital grows very one percent, imports will grow 0.16 percents. For this reason, we must pay more attention to introduce foreign capitals into China's economic construction.(4) Final consumption rate and imports have a positive correlation relationship. When final consumption rate grows every 1 percent, imports will grow 0.31 percents. So the mobilization of domestic demand is the effective way to increase imports and ease trade imbalance.(5) The increase in export volume leads to the increase in imports. Before the reform and opening up, if export grows every one percent, import will grow 1.27 percents; after the reform and opening up, when export grows one percent, imports will grow 0.77 percents.This indicates that export plays an important role in developing imports.(6) The growth of import last year will promote the growth of imports this year. Before the reform and opening up, imports in last year grows every 1 percent, import in this year will grow 0.56 percents, after that, this number grows to 0.69 percents.(7) The relationship between GDP and imports is instable: a conclusion contrary to the common sense is got by the analysis on 1950-1979 data: GDP and imports have reverse changes on relationship.When GDP grows 1 percent, imports will drop 0.164 percents; when we deal with the data of 1980-2007, GDP was removed because of unstablity, so in our measurement model, GDP is not embodied.Finally, some measures are proposed to promote trade balance, such as using tariff and non-tariff regulation measures, adjusting RMB exchange rate, protecting domestic industry security of mainly imported products, establishing nation-to-nation imported policies and reforming foreign trade system.