The Study On How Foreign Trade And FDI Effect Income Inequality In China

Foreign trade of China's play a key role on the growth of GDP during the 30 years reforming and opening up, the continuous rising external dependence become a unique distinction of China's economic development. However, with China's hypergrowth of economic development,the income gap between rural and urban and respectively is continued expanding,this situation is a major threat to our strategic goal of building a harmonious society. This article attempts to analyze the increasing progress of the urban and rural incomes in China and the causes of the current trajectory of the various factors, focused primarily on the increasing of income gap, particularly in foreign trade and FDI and other factors. Purpose of this paper is to analyze the impact of the trade and FDI in China on urban and rural incomes, especially on the overall income levels, income inequality and income structure changes, the mechanism and then give an empirical study and analysis. Theoretically Speaking, this paper as bedding to sort out the existing literature on the mechanism of opening and income changes in two steps to do a systematic sort: first visit of Foreign Trade and the impact of changes in income mechanism, to tease out the impact of trade income of Chinese urban and rural residents changes of the four mechanisms:elements of the price mechanism, demand preferences mechanism, mechanism of technological progress and labor market flexibility mechanisms. Studies suggest that the transmission mechanism of trade affected by these four different levels, different needs and different types of income changes, which led to income levels, income inequality and income structure changes. This is particularly among the elements of the price mechanism is a typical, non-skilled labor-intensive Chinese exports to the pattern of trade will lead to non-skilled labor factor prices increase and the decline in relative wages of skilled labor, wage inequality decreased. Study FDI impact on the mechanism of changes in income of Chinese residents. The FDI is mainly through the impact on employment and industrial structure, improve the growth rate of total factor and the gravitational effect of the funds to have an impact on the income gap. In China, the role of stimulating employment is more apparent. About the emperical study, this paper uses 1978-2010 years of Chinese urban and rural income data, foreign trade, FDI and Chinese urban and rural income levels, income inequality and income structure of the relationship. Changes affecting the income level of other variables such as technology, GDP etc. have been effectively controlled. Through empirical testing, I got the following conclusion:international trade on rural income gap has a positive correlation between the FDI on rural income gap has a negative impact. When trade openness increases, the Gini coefficient of rural residents will bring increasing; increased dependence of investment, will bring reduced the Gini coefficient of rural residents. Also found that the real income of rural residents increased by 1, will bring the Gini coefficient of rural residents increased; increase in GDP per capita, Gini coefficient of rural residents will increase rural income gap within the higher level. The opening up of the impact of the income gap between urban and rural areas are different. When increased trade liberalization will bring within the Gini coefficient of urban residents increased, indicating that trade liberalization has led to more severe income gap between urban residents, this is the same with the rural areas; openness from the investment point of view, the investment will lead to increased dependence on the Gini coefficient of urban residents in internal increased dependence can be seen that the increase in investment will be a serious expansion of the income gap between urban residents and internal; and increase income of urban residents, will bring within cities and towns to reduce the Gini coefficient, the better the economic development of cities and towns, then the income gap of urban residents will be more low; GDP per capita for each additional increase in the Gini coefficient would result in cities and towns, adding to urban income gap.The study of Gini coefficient between urban and rural found that the relationship between the indicators, international trade, the income gap between urban and rural areas have a positive impact, while the introduction of FDI also increased the income gap between urban and rural areas. Trade openness increases, the Gini coefficient between urban and rural areas will increase; when investment increased dependence, the Gini coefficient between urban and rural areas will increase. The real income of urban and rural residents every increase in the Gini coefficient between urban and rural areas will bring reduced; if the increase in GDP per capita, Gini coefficient of rural residents will increase, the income gap between urban and rural residents, the higher the degree.Finally, I draw the conclusion and give the appropriate responses:China must adjust the industrial structure, vigorously develop the service industry; vigorously develop the existing human resources to improve the structure of labor force, improve the quality of labor supply, the transformation of economic growth and human resource utilization ways to improve the efficiency and utilization of human resources staffing levels; to change the existing trade development strategy of China's economic growth mode transformation to become a top priority. Based on our comparative advantages in human resources, adjust the trade structure, guide and promote economic growth mode transformation, promoting China's economic, trade and sustainable development; to develop a common benefit of trade and foreign investment policies to encourage departments or regions to benefit from drive to benefit damage or damage to regional development authorities; government should strengthen against the personal income tax collection in order to prevent excessive concentration of wealth in a few wealthy class, and should establish mechanisms to protect low-income people, their subsidies, subsidies and other transfers of redistribution and, based on the actual situation around the strict enforcement of the minimum wage; the social security system coverage to rural areas, improve rural poverty. We should open the sources of financing the social security system, and consider the introduction of social security taxes, so as to establish a tax revenue as the main source of social security funding mechanisms. We also have to establish a social security expenditure transfer payment system, reduce the differences in income distribution between regions and try to narrow the gap between members of society.