Trade Led Growth in China since 1978: An Empirical InvestigationAuthor : Preeti Sharma and Priyanka Sahni
Volume 7 No.3 October-December 2018 pp 12-19
The aim of this study is to explore the causal relationship between the exports, imports and economic growth of Chinese economy using time series data running from 1978 to 2016.Co integration, Granger Causality analysis and Vector Error Correction Mechanism (VECM) has been used in order to test the hypotheses about the presence of causality and co integration among the variables. The co integration test confirmed that exports, imports and GDP are co integrated, indicating an existence of long run equilibrium relationship among the variables and also confirmed by the Johansen co integration test results. The Granger causality test finally confirmed the presence of bi-directional causality between exports, imports and GDP. The study further shows that relative share of china’s exports in world exports has increased significantly after the introduction of economic reforms. Further, the rising exports have also made a significant contribution to the economic growth of Chinese economy due to forward and backward linkages.
Foreign Trade, Economic Growth, Exports, Co integration, Granger Causality
 Edwards, S. (1998). Openness, productivity, and growth: What do we really know?. Economic Journal, 108, 383–98.
 Esfahani, H.S. (1991). Exports, imports, and economic growth in semi-industrialized countries. Journal of Development Economics, 35, 93–116.
 Fan Bonai & Zhu Hua. (2005). The Construction and Actual Investigation of Local Government Performance Evaluation. Journal of Political Science, (1): 33.
 Grossman Gene & Helpman E. (1991). Innovation and Growth in the Global Economy. MIT Press, Cambridge.
 Gujrati Damodar (1999). Essentials of Econometrics. Published by McGraw-Hill Ltd. Company.
 Gujrati Damodar & Sangeetha (2007). Basic Econometrics. Fourth Edition, New Delhi, Tata Mc. Graw Hill Publishing Company Limited.
 Jong Wha Lee (1995). Capital Goods Import and Long -Run Growth. NBER working paper series, Working paper No: 4725.
 Jordan Shan & Fiona Sun. (1998). On The Export-led Growth Hypothesis: The Econometric Evidence from China. Applied Economics, (30).
 Jordan A. C. & Eita, J. H. (2007). Export and Economic Growth in Namibia: A Granger Causality Analysis. South African Journal of Economics, 75, 3.
 Kruger A. (1980). Trade Policy as an Input to Development. American Economic Review, 70, 188-292.
 Liu, X., Song, H. & Romilly, P. (1997). An Empirical Investigation of the Causal Relationship between Openness and Economic Growth in China. Applied Economics, 29, 1679-1686.
 Lucas Robert. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22, 3-42.
 Marshall, Alfred. (1920). Principles of Economics. London.
 Mallick S. K. (1996). Causality between Exports and Economic Growth India: Evidence from Co-integration based Error-correction Model. Indian Journal of Economics, 76(302), 307-320.
 Mill, John Stuart (1848). Principles of Political Economy, 1, Published by, George Rutledge & Sons Ltd., London.
 Onafowora, Olugbenga A. & Owoye Oluwole. (1997). Trade policy, Export Performance and Economic Growth: Evidence from Sub-Saharan Africa. Journal of International Trade and Economic Development, 5, 341-360.
 Rivera-Batiz, F. L. (1985). International Finance and Open Economy Macroeconomics. New York: Macmillan.
 Romer Paul. (1986). Increasing returns and long Run Growth. Journal of Political Economy, 94, 1002-1037.
 Shan, J. & F. Sun. (1998a). Export-led Growth Hypothesis for Australia: An Empirical Reinvestigation. Applied Economics Letters, 5, 423-428.
 Shan, J. & F. Sun. (1998b). On the Export-led Growth Hypothesis: The Econometric Evidence from China. Applied Economics, 30, 1055-1065.
 Thangavelu, S. M., & Rajaguru, G. (2004). Is There An Export or Import Led Productivity Growth in Rapidly Developing Asian Countries? A Multivariate VAR Analysis. Applied Economics 36(10), 1083-1094.
 Tang, T. C., (2006). New Evidence on Export Expansion, Economic Growth and Causality in China. Applied Economic Letters, 50, 413-416.
 Zhu, Z. G. (2007). A gravity model of China‘s trade flows, Recent Developments in the Chinese Economy. NOVA Science Publishers, Inc., 135-172.