Foreign Trade And Economic Growth Related To Empirical Analysis

Under the current trend of economic globalization, the relationship of each country has become widened and consolidated in economy. It is important for China, which just entered World Trade Organization in December 11,2001, to be able to participate in international trade and to take advantage of this chance to develop its economy.Since implemented the policy of reformation and openness in 1978, China has experienced a rapid growth in economy and foreign trade. During the period, the rate of increase in foreign trade has been in lead over that in Gross Domestic Production. Also, the dependency of foreign trade has been keeping a high level of over 40 percent in recent years. It is obvious that the rate of increase in China's foreign trade is promoting the economic growth.The article will make analysis to Chinese practical condition to investigate the relation between foreign trade and economic growth.The result shows that the contribution which China's foreign trade has made to economic growth is more and more notable. It must be pointed out that the contribution which export has made to economic growth mainly bases on the expansion of its value, that is to say, the contribution depends on the increasing proportion of export to GDP. Import has mainly been composed of capital goods such as capital-intensive or technology-intensive commodities. These commodities have a strong effect on economic growth. Moreover, the effect of import on economic growth is weakened to a certain degree in that a proportion of the above-mentioned capital goods flow into the industries of improvement trade. These industries mainly consist of foreign investment enterprises, which focus on producing labor-intensive commodities of low value added. This is the result that our comparative advantage is still at a low level of labor-intensive industries, which has a poor push on economic growth. We should, therefore, escalate our comparative advantage in terms of the usage of our present comparative advantage and focus our strategies on developing human capital-intensive industries. These require the implementation of strategies of science and technology to prosper our country and promote the level of technology advance; require the combination of trade policy, industry policy, foreign investment policy and regional development policy to enhance the effect of foreign trade on economic growth.