The Empirical Study Of Relationship Between Trade Openness And Economic Growth

The relation between Trade Openness and the Economic growth have beencontinuously paid deep attention. Some of theoretical studies and positive researcheshave indicated that extending dependence on foreign trade and FDI（Foreign DirectInvestment） is benefit to the Economic Growth. But there are also some oppositetheories. Since the reform and opening up, China’s opening up and economicconstruction has made a breakthrough in the development. 2011 China’s GDP was47.1564 trillion yuan, The volume of imports and exports totaled $ 3.64 trillion, theactual utilization of foreign capital amounted to $ 116.011 billion. But China’s GDP in1978 was only 364.52 billion yuan. Import and export trade amounted to $20,640,000,000. More than three decades, China’s economic growth has been anupward trend. 30 years of the 1979-2011 average annual economic growth ratereached 9.8 percent. During this period, China’s import and export trade growth rateof 13.23% and the foreign capital actually utilized the amount of average annualgrowth of 23.33%. It can be seen that despite there are many factors affecting theEconomic Growth , China’s economic growth has great relevance with foreign tradeand attracting foreign direct investment. Therefore , whether there is long-term stableequilibrium relationship between Trade Openness Degree and Economic Growth andwhat the mechanism of influence or action between Trade Openness Degree andEconomic Growth need to be conducted a rigorous empirical analysis. But the studyin this area is still in the weak link, about which it is necessary to do depth study. Thisis my paper’s intention.This paper first introduces the openness to trade theory and economic growththeory. Based on research results at home and abroad, the choice of the two indicatorsmeasure a country or regional trade openness are the dependence on foreign trade, andthe dependence on foreign dependence. Followed by use of statistical data analysis,China’s economic growth, foreign trade, and attracting foreign direct investment takethe shape of rising toward. Carrying on empirical analysis and using the ADF unit root test inspect the time series stationary. From 1978 to 2011 gross domestic product（GDP）, import and export trade and the actual utilization of foreign investment areintegrated of order one. Co integration analysis can be carried out. Carrying on cointegration analysis, we get the long-run equilibrium relationship between tradeopenness and economic growth : LNGDP = 12.8 + 2.77 LNWM 3.07LNFDI +ε_t.Weget balanced relationship of dependence on foreign trade and economic growth:LNGDP = 11.07 + 0.04LNWM. We also get balanced relationship of dependence onforeign investment and economic growth:LNGDP = 1.41 1.86LNFDI +ε₁. Finally,by the Granger causality test we identify the one-way or two-way causal relationshipbetween trade openness and economic growth. The results show that the import andexport have played a positive role on economic growth in the short term, and thetwo-way Granger causality exists between the import and export and economicgrowth. In the long term there is only one-way Granger causality dependence onforeign trade and economic growth. Economic growth promotes the improvement ofthe dependence on foreign trade, but the improvement of foreign trade dependence isnot significant factor in economic growth. Reverse the long-term equilibriumrelationship exists between foreign investment dependence and economic growth.Granger causality analysis shows that there is unidirectional Granger relationshipbetween foreign dependence and economic growth during short-term or long-term. Inshort term, economic growth promotes the actual utilization of foreign capital, but theactual utilization of foreign capital is not significant factor to economic growth; In thelong term, the actual utilization of foreign investment has Granger relationship toeconomic growth, however, economic growth hasn’t impacted on the actual utilizationof foreign capital.Finally this article concludes with concrete measures and proposals to promoteeconomic growth. Optimize the industrial structure of foreign trade and improve thetechnological content of export and import products; Increase the volume of exportand import with emerging countries and try our best to expand domestic demand;Increase the intensity of foreign capital and try to make full use of the foreign capital.