An Empirical Study On The Development Of China’s Textile Trade And Its Contributions To Economic Growth

The textile industry has been playing a significant role in the national economy, which is the vital pillar industry and livelihood industry of national economy. China has been the largest textile producer as well as exporter. In recent years, China’s textile industry has developed into a considerable industry with strong comparative advantage and provided advantageous support for the healthy and steady development of China’s economy after reform and opening-up. Since entering the post-quota era in2005, with the appreciation of RMB, the rising prices of raw materials, the ascending labor costs, China’s textile and garment industry will be faced with enormous pressure in global economic competition. The textile industry is confronted with great challenge in earning foreign exchange through exports, absorbing employment, promoting economic growth under the new economic environment.This paper uses the methods of the combination of quantitative and qualitative analysis, and combination of theoretical and empirical research, to explore the relationship between textile trade and economic growth in China. On the basis of theoretical analysis, this paper mainly adopts econometrics method like the Co-integration test and Granger causality test on China textile and apparel trade and industrial output data from1980to2004; the unit-root test, Co-integration analysis and Granger causality test on quarter data of25provinces (city, municipality) from2004to2008in order to discover the long-term equilibrium and Granger causality relation between textile and garment trade and its production value. Being assured of the apparent stimulative effect textile and garment import and export trade does on domestic output value, this paper tries to calculate the textile trade’s contribution rate to economic growth using data between1994and2010.In the calculating process, the traditional equation on measuring contribution rate of economic growth has been revised, and the influences that export trade does on domestic consumption and investment have also been taken into consideration. It turns out that since the post-quota era, China’s textile and garment trade’s contribution rate to economic growth decreases obviously, while the goods and service trade’s contribution rate to economic growth shows a substantial growth.The rising prices of domestic raw materials and labor costs, plus the deterioration of the international trade environment, have had a huge impact on China’s textile and garment trade. Under the global economic integration, as the lower value-added part of the chain, China’s textile industry has to learn and introduce advanced technology actively from developed countries, as well as making full use of comparative advantage. It must be able to exploit the advantage of backwardness to increase industrial added value, driving economic growth through technological progress. The government should guide and encourage the upgrading of the textile and garment industry’s structure, giving policy support to breakthrough the bottleneck link, so that the textile and apparel industry manages to become the new power source of China’s economic growth in the next20years.