A Study On The Impact Of China’s Trade Openness On The Country’s Economic Growth

The relationship between trade openness and economic growth has been of great concern. Though many theoretical and empirical studies have shown that the expansion of a country’s foreign trade can promote one’s economic development, but there’re still different views. Study the effect of trade openness on economic growth is an important starting point. Since the reforms in1978, China’s foreign trade and economic development have made outstanding progress. In2012China’s GDP has reached51.9322trillion yuan, equivalent to$8.25triillion, the import and export trade amounted to3.86676trillion U.S. dollars, while China’s GDP in1978was only364.52billion yuan and import and export trade amounted to$20.64billion. In the past30years, China has always maintained rapid economic growth, from1979to2012the average annual economic growth rate is9.8%. During this period, the average annual growth rate of China’s import and export trade reached to13.23%. Apparently between trade openness and economic growth should be the existence of a close association. This article is to explore the relationship between trade openness and economic growth in China in the context, in order to find a long-term mechanism of trade openness on Economic Growth.This paper first reviews the theory, including the theory of trade openness and economic growth, and then after a combing of the domestic and foreign literature about trade openness indicators we select an indicator including the openness of trade in services and goods. In the article we also give a view of the mechanism’s new features of trade affecting economic growth in the context of a global network of production to provide a theoretical description of the empirical analysis of the article. Second, the article depicts China’s economic growth between1982and2011, trade openness macro statistics and give an explanation to the internal structure of trade openness. Then the paper go into the econometric analysis section with giving the variable sequence the unit root test to examine the stationarity of the variables and get the result that the variables are the same order one. So we use the Johansen test for co-integration analysis and get the long-run equilibrium relationship between trade openness and economic growth, also we make an interpretation of its economic significance. By the Granger causality test, we could find there’s the one-way or two-way Granger causality between trade openness and economic growth. And at last the impulse response function diagram of trade openness affecting economic growth dynamic analysis indicates that there is a certain degree of volatility of the impact of trade openness on economic growth. Furthermore we analyze the trade openness in goods and trade openness in service on economic growth in the same way. Finally, this article concludes with specific measures to promote economic growth including optimizing foreign trade structure, giving an emphasis on promoting openness of trade in services and its development and focusing on strengthening the independent innovation capability building.