A study on the determinants of China's export.

Abstract

Today, China is the second largest exporter in the world with a market share of 8.7%, a three-fold increase since 1992. The significant increase of China’s export is important to China’s economic growth and has a substantial impact to the world. This report would examine the causes of the rapid development of China’s export structure. A model is established to study the impact of variable factors such as the exchange rate, external demand, labor cost, relative goods price, FDI inflows, time trend and WTO accession on China’s export between the period 1990 and 2007. This report focuses on the three main trade partners of China namely, Japan, the European Union (EU) and the United States of America (US). The results show that the external demand and FDI inflows are the most significant determinants. In our studies, the exchange rate was found to have an insignificant response whereas the direct relationship with export was proven, as expected. We deduced that this might be due to the limited fluctuations during the sample period. Overall, the cumulative factors indeed had a positive effect on the export industry.