Panel Data Studies On Guangdong Province Trade Potential: A Gravity Equation Analysis

Guangdong Province, located in the coastal area of China, is a typical export-oriented economic development area in our country, and has paid a great contribution to China’s rapid economic development over the past 30 years after reform and opening-up. Under the complex background :1)slow recovery in the global economy; 2)the US strategically change to focus on the Asia-pacific area; 3) unrest in the Arab world; 4)the relation between China and Japan becomes tenser; 5)the unrest dispute in the east China sea and the south China sea. The foreign trade which Guangdong Province’s rapid development depends on faces an unprecedented challenge. In order to have a sustainable development economy in Guangdong, we need to do the research combining national economy, politics, culture, region and science technology across the multi vision and global vision among history, nowadays and future.This paper utilized panel data of 36 major trading partners from 1993 to 2012 year to estimate the trade gravity model to do the regression analysis for the trade flow between Guangdong Province and partners. By this method, tried to find the main factors that affect Guangdong Province trades, especially the effect of the accession to the WTO and other regional trade agreements on the whole trades, and analyzed the trade potential of Guangdong province.In this paper, we started from the early foreign trade development situation in Guangdong Province. And based on the studies on the trade status in volume, structure and competitiveness of Guangdong Province, we modified the trade gravity model and discussed the sample selection and data sources. After that, we made a comprehensive research on the setting of gravity model and the selection of estimation method by comparing different kinds of data process and regression method. On the foundation of the results of different methods, chose the most appropriate trade gravity model and analyzed the recession results of the trade gravity model for four different samples to predict the trade potential. Then we applied the trade gravity model to predict the trade potential of Guangdong Province, both import potential and export potential. In the end, summarized a conclusion according to results of recession analysis of the trade gravity model for the four samples and the trade potential analysis for Guangdong province’s import and export, and we hope we can provide the corresponding suggestion in policy.