The Analysis Of The Changes Of Terms Of Trade Between China And Korea And Its Effect Factors

The bilateral trade develops rapidly between China and Korea since theestablishment of diplomatic relations. Whether the change of the structure of trade andtrade growth bring interests for our country in the trade with Korea, is a matter ofconcern. Terms of trade is a measure of a country of the size of the profit targets inbilateral trade. In this paper, we make the terms of trade between China and Korea asresearch subjects. And make analysis of the changes of terms of trade between Chinaand Korea and its effect factors.According to China’s trade status with Korea and detailed data,we calculatedChina’s terms of trade with Korea from2002-2012,based on the Paasche price indexformula and Laspeyre quantity index formula.The result shows that the net barterterms of trade of whole products and the net barter terms of trade of the primaryproducts and the net barter terms of trade of industrial products are deteriorating.Thenet barter terms of trade of primary products had the most serious deterioration. Theincome terms of trade of whole products and the income terms of trade of industrialproducts are showing an improvement trend,while the income terms of trade of theprimary products is deteriorating.After making the analysis of the changes of terms oftrade, we state the effect factors of the terms of trade in theory,GDP,exportcommodity structure,FDI,tariff. And make empirical test of the effect factors of theterms of trade between China and Korea. The empirical result shows that,China’sGDP and structure of export goods from China to Korea have negative correlation withthe price terms of trade between China and Korea. The FDI from Korea to China andtariff have positive correlation with the price terms of trade between China andKorea.At last making conclusions and puts forward the pointed recommendations to improve the terms of trade.