The Effect Of Language On China’s Foreign Trade Flows And Its Dynamics Changes

With the globalization of trade, cultural exchanges and cooperation between different countries, it is essential that the exchange of different languages, for it is an important manifestation of transaction costs in the international trade. Due to the existence of different language and culture, it makes errors and misunderstandings whren they communicate with others, then it, of course, affects the completion of the normal trade. Therefore, as a communication tool, the language is an important bridge in business communication and negotiation and we can not deny that the effects of language in modern trade. But so far, the study of language and international trade is rarely, it still need to constantly deepening and improvement in many respects.As Perren and Holloway said, the language which is most widely used had been the most important tool for trade expansion in the late19th and early20th century. At the same time, the cost of transaction in English in minus (Oh et al,2011.) and the effects on trade flows is biggest(Fidrmuc and Fidrmuc,2009; Selmier II and Oh,2012). Therefore, we choose TOEFL average scores for each of the countries as the language proxy variables. This paper attempts to increase a new language proxy variable in extensional gravity model to analyze the impact of china’s international trade flows by using English and change trends. In the study of trade flows, we try to analyze the effects on good trade and service trade’s imports and exports flows. First, this paper selected the trade dates from2000to2012to analyze the effects on good trade and the related dates from2000to2011to analyze the effects on service trade. Then we found that language have positive impact on China’s foreign trade both in good trade and service trade, and the impact on imports flows is greater than exports flows. Second, we found that the impacts of English proficiency on these two trades are different which has greater influence on service trades. Finally, we analyzed the dynamic trend of language proficiency impact on services trade flows and we found that the dynamic trend is upward.Language economic value reflects not only in impact on individual labor income, but also on a country’s trade exchanges and economic development. What is more, the language economic value is greater in the current international environment, for example, China’s foreign trade, especially on trade in services.For the importance of language, this paper also aims to appeal to the relevant departments to strengthen the importance of Chinese language education in China. On the one hand, strengthening the foreign language education, especially English education enhances communication skills to make it have a greater competitive advantage in international trade. On the other hand, promoting national languages is the effective way to enhance the influence of the national language and to improve the country’s international status.