The Econometric Analysis Of Effect On China's Foreign Trade By Financial Crisis

Since reform and opening, along with the changes in market economy opening degree, China's economy maintained a steady upward trend. As a powerful driving rapid economic growth in one of three major driving forces, foreign trade and investment, consumption, China's trade more than has been considerable development. As of the end of 2007, foreign trade dependence reached up of 50.69%. December 11, 2001, China formally joined the World Trade Organization (WTO), announced the development of China's foreign trade has entered a new era, China's economic development through closer trade ties with the world economy together. However, financial crisis broke out in 2007, the overall economic of the United States and major exporting countries in Europe saw in recession, resident'income decline, began to worry about the crisis and unemployment in the future, which make a sharp reduction in foreign demand; at the same time, the United States took out the expansion policy led to the weak dollar, RMB appreciation, making China's exports lost have their price advantage in the industry competitive. With a drastic downturn of China's import and export trade, studying on the conduction mechanism between the crisis and the foreign trade becomes essential.Measuring the impact of trade in this financial crisis by the quantitative economic method, it is a new attempt by constructing a composite index which used to describe the impact of China's trade. Based on existing research results, through the Construction of the import and export trade index system, synthetic composite index of import and export trade, we used quantitative economic method to analyze the index of trade, the U.S. GDP and money supply M2, tried to explain the impact of china's foreign trade in this financial crisis. This paper includes the following:Chapter 1 Introduction, this section describes the research background, research significance, research paper ideas and research methods.Chapter 2 Literature Review of basic theory and conduction, this section reviewed the related domestic and international research findings from the import and export trade contributed to economic growth, the impact of economic by financial crisis, and transmissions between the foreign and crisis three aspects. Based on existing research results, we brought forward that the transmission has two ways: demand transmission and exchanger rate transmission.Chapter 3 Index System of China's import and export, this section firstly established the indicator system which can quantities analysis the impact of import and export trade, and synthesized the composite index of import and export trade for the subsequent in-depth study.Chapter 4 The quantities analysis of the impact of China's import and export trade by the financial crisis, this section selected years 2002-2009 degree of data, used the index of import and export trade, the U.S. GDP and money supply M2 as the endogenous variable, established vector autoregressive VAR model, on the primes of the sequence's stabling showed by unit root tests, we took Johansen co integration test methods, Granger causality test and impulse response function for the depth study of the impact of China's import and export trade by this financial crisis.In research methodology, this paper used the qualitative analysis and quantitative analysis as research methods. In the process of establishing China's foreign trade indicator system, the initial indicator's selection based on lots of literatures and existing research findings, we took out the transmission has two ways: demand transmission and exchanger rate transmission. Based on qualitative research, we selected the indicators which may reflect the development situation of import and export trade into the system. In the aspects of using factor analysis to synthetic composite index, we used statistical analysis software SPSS17.0for processing; We use statistical analysis software Eviews6.0 in VAR model, Johansen co integration tests, Granger causality test and impulse response function. In addition, we use a large number of charts and tables for showing and describing the relevant test results, we hope we can make more profound and intuitive instructions.Through using qualitative and quantitative research methods, we obtained the following conclusion:1. Literature review and qualitative studies show that the transmission between financial crisis and China's import and export trade has two ways: demand transmission and exchange rate transmission. Specifically, demand transmission means that financial crisis caused economic regression, unemployment rate rising, resident's income decline, wealth decline, and worrying about the future, the demand of import decline; exchange rate transmission means that the United State took out the expansion policy, liquidity excesses, the dollar/RMB exchange rate decline, it made china's export lose the competitiveness.2. Qualitative study reflects that China's import and export trade index system should include foreign trade and macroeconomic indicators two parts. For china's higher trade dependence indicator and the importance function from foreign trade, taking parts of macroeconomic indicators into the system, which can reflect the state of development of import and export trade indirectly. 3. Factor analysis showed that the index system implicated two common factors: import and export trade factor and macroeconomic factor. They reflect the development of China's import and export trade from direct and indirect two aspects.4. China's import and export trade index by weighting method shows financial crisis broke out, china's foreign trade has seen a dramatic drop of the situation in 2007. This shows that the United States as the world's largest importer, and with our close trade relationship, crisis country's overall economic regression has had a major impact effect on China's import and export trade.5. Johansen co integration tests show composite index of import and export trade, the U.S. GDP, USD/RMB exchange rate, unemployment rate and M2 money supply the three variables have some equilibrium relationships in the long term. Meanwhile, Granger causality test results also show that U.S. GDP, unemployment rate and M2 money supply were China's import and export trade comprehensive index's Granger causes. However, USD/RMB exchange rate isn't China's import and export trade comprehensive index's Granger cause.6. In a comprehensive index of import and export trade, the U.S. GDP and the money supply M2 as internal endogenous variables we established VAR (2) model, impulse response function show, GDP has an positive impact on China's foreign trade. When the U.S. economic has a rapid and stable development, GDP increases, China's foreign trade has a stable development; Money supply M2 has a different impact on China's foreign trade in different periods. In the initial time of the money supply increases, residents'purchasing power have been improved, China's foreign trade increases; in the median time, money supply result of excess liquidity, exchange rate depreciation, it will have a negative impact on China's foreign trade. But over time, China's foreign trade development will eventually return to the initial level. The unemployment rate on the impact of China's import and export trade is a negative reaction, and can be go on 4 periods, when U.S. unemployment, income decline, the development situation of China's import and export slowdown or decline; USD/RMB exchange rate on the impact of the import and export trade is a positive influence, and it is the weakest among the four indicator. That USD/RMB exchange rate in the financial crisis is not the main reason for the impact of China's import and export trade.