Price Terms Of Trade In Factor Analysis

The motivation for the country to join in the international trade is to get the trade gain. However, the terms of trade directly decides how much a country gained from the international trade. The common opinion is that when the terms of trade turns better, the more the trade gain from the international trade. Vise verse.In order to analysis the trade gain from the international trade with terms of trade (TOT) more exactly, the concept of TOT has evolved form the net batter terms of trade (NBTT) to income terms of trade (ITT) and factor terms of trade (FTT). For the tendency of China's TOT, different authors hold different opinion, but most authors agreed that the NBTT of China is becoming worse. How to improve China's NBTT? Before the answer, first we need to analysis the factors which influence NBTT. That is just the meaning of this article.As ITT and FTT are calculated based on NBTT, therefore we choose NBTT as the breakthrough point.The frame of this article is as following. First, we will analysis the status of China's NBTT, the analysis shows that China's NBTT is becoming worse even though the ratio of manufactured goods becomes higher and higher. Second, we analysis in theory how economic growth, industrial structure, FDI and foreign exchange rate influence NBTT. The analysis shows that these factors will change the NBTT to different direction based on the situation of different countries. Therefore this article turns to the empirical analysis, just to try to find out the influence direction and degree of these factors to China's NBTT. As from 1995 until now, the exchange rate of China changes little. So we don't include this factor in our empirical analysis. The empirical analysis shows that in china, the economic growth and industrial structure have worsened the NBTT, but FDI bettered NBTT. But the influence of FDI is lower than that of economic growth.