Study On China's Bilateral Trade Flow Based On The Gravity Model

Since the reform and opening-up in China, the trade in our country has entered in a stage of high-speeding development. Both the trade's volume and its development speed maintain a rapid growth on the whole, attracting the attention of the whole world. The trade has become an important part of our country's economy, and it is the important guarantee for our country's economy to grow continuously. At the same time, along with the advancement of economic integration process, the friction with trade partners happens in our country more and more frequently, the international and domestic economic situation also have changed largely, so the bilateral trade between our country and our main partners faces huge challenges. Under such a macroscopic background, the researches on our country's bilateral trade flow have become a core and hot subject in the field of China's trade economy. Many scholars research on China's bilateral trade flow not only have carried on qualitative analysis from the aspect of theory, but also quantitative analysis from the aspect of quantity. In the relevant quantitative empirical analysis, the application of gravity model is more of a leader.This paper states briefly the relevant literatures of the gravity model, then introduces the basic theory of the gravity model, the selection of variables and so on. Then using the established and improved trade gravity model to analyze the flow of bilateral trade between China and its 32 major trade partners from the year 2000 to 2013, finding out that the main factors affecting the bilateral trade flow of our country are variables such as national GDP, geographic distance between countries, regional cooperation organizations, national population and so on. Among them, the effect of national GDP and regional cooperation organizations is the largest and positive influence; followed by the influential effect of geographic distance is larger, but the influence is negative. At the same time, the trade gravity models of EU and ASEAN are built, and we compare them with our country's trade gravity model, analyze further the main factors affecting our country's bilateral trade flow. And then using trade gravity model we have established to measure the potential of our country's trade flow, the result shows that trade between our country and most of its trade partners is in the trade excessive state, the potential of bilateral trade is not big.In the end, according to the empirical part's conclusion to put forward policy recommendations to improve our country's bilateral trade, the policy recommendations can be summarized as the following four aspects:paying attention to domestic and foreign demand at the same time; strengthening the cooperation with regional organizations; implementing diversification strategy of trade partners; facing the trade disputes and overcoming the trade barriers in a positive attitude.