Impact Of Using The Arctic Passage On China’s Economic Interest

The navigation condition of the Arctic Ocean has been improved greatly owing to the accelerated melting of sea ice. The Northeast Passage and the Northwest Passage have emerged different durations of ice-without window every summer, providing opportunity for commercial use of the Arctic waterway. Following the first trial navigation on the Northeast Passage in September 2013, China Merchantman "Yongsheng" once again sailed in the Arctic in October 2015, by round trip, laying the foundation of normal operation of the Arctic Passage. Sea ice in the Arctic Ocean accelerates melting, then Arctic hidden traffic strategic value will become increasingly prominent, that will not only make maritime transport pattern in the world change greatly, but also make trade and economic pattern in the world change dramatically. China is a country near the Arctic, locating in the extension line of the Arctic route, and will surely be affected by these great changes.The opening of the Arctic Passage can greatly shorten shipping mileage from China to Western Europe and Northern America, thus reduce transportation cost of China’s oversea trade. Cost reduction will not only have an impact on trade flow of China-EU and China-America, but also has great influence on China’s economic growth. Study on the effect to China’s trade potential as early as possible and rapid response to changes in international trade flow with the opening of the new channel, is conducive to improvement of China’s main exporter status and formulation of sustainable trade policy; Further research on effect to China’s economic growth can provide strong support for China to enhance economic status and comprehensive national power. In short, highly paying attention to huge economic value of the Arctic route, is conducive to China’s channel interests in the Arctic, as well as influence China’s long-term interests in the Arctic and global strategy.This paper first expounds background and significance, content and framework as well as main innovation points. Afterwards, it is followed by research progress at domestic and foreign, mainly including shipping value, effects on trade potential and effects on regional economic development of the Arctic Passage. On the basis of discussion on existing research, it further clarifies the ideas and methods of this study. Then the paper introduces the basic overview of the Arctic Passage in detail, including sea ice condition and the present navigation situation, and qualitatively explores influence mechanism of the Arctic navigation to promoting economic growth through foreign trade, providing facts and theoretical basis for follow-up study. After that, it evaluates potential economic strategic value of the Arctic channel from two levels. The first level is Chapter 5, quantitatively assessing impact on China’s foreign trade of Arctic waterway in consideration of sea ice and other special factors. This chapter adopts a modified gravity model to substitute shipping distance for sailing time, using 19 years panel data of China to 47 countries / regions and comprehensively compare different trade enhancing effects in conditions with and without sea ice. The second level is Chapter 6, on the basis of results of Chapter 5, it further assesses economic growth effects caused by trade flows augment, for indirectly estimating effects on China’s economic growth by the Arctic Passage. This chapter bases on scenario analysis of the simultaneous equations model and prediction function of ARMA, assuming that the Arctic channel is put into regular use after 2020, respectively, compares different effects in conditions with and without sea ice to China’s GDP, capital accumulation and employment level in 2020-2025 by the Arctic navigation. Finally, conclusions and research prospects of this paper are proposed.Main results show that in the condition with sea ice, the opening of the Arctic route will make trade potential of China to target countries along the Arctic waterway averagely increase by 10.23%, China’s overall trade potential increase by 1.44%, and make China’s gross GDP, capital accumulation and employment level in 2020-2025 respectively increase by 0.51%, 0.35% and-0.002%. Once sea ice melts, the Arctic waterway to a comprehensive navigation, trade potential of China to target countries along the Arctic waterway will be further increased by 19.02%, China’s overall trade potential will be further increased by 3.98%, and China’s gross GDP, capital accumulation and employment level in 2020-2025 will be further increased by 1.41%, 0.61% and-0.004% respectively. Accordingly, effect on employment level by using the Arctic waterway is not significant or even negative, which may due to in short term substitution effect of import being larger than job creating effect of export. But in the long run, import has "secondary employment effect" and "compensation effect", and with the interaction between different elements of economic system, comprehensive employment effect caused by trade scale expansion decreases first and then increases. Thus final impact on employment level of the Arctic Passage will be positive, and the more trade volume increases, the more positive effect on employment. Therefore, in the long run, the Arctic navigation will not only expand the space of China’s foreign trade, but also provide enhancing room for China’s economic growth, capital accumulation and employment. Once sea ice disappears completely, the Arctic Passage will bring more significant and positive influence to China’s foreign trade and the economic growth system.