The Research on the Relationship Between Import Trade Structure and Economic Growth in China 1

Primary products play a positive and promoting role in economic growth, while industrial products have negative effects.

1 The Research on the Relationship Between Import Trade Structure and Economic Growth in China 1 SUN Qiang School of Economic and Management, North China University of Technology, P.R.China, Sunqiang06@16.com Abstract: This paper analyzed percentage change of primary products and industrial products in Chinese import, and made an further analysis on the inner proportion of primary products and industrial products,; The third part studied the correlation between the import structure and economics growth in China,and the result is shown that the primary products play a positive and promoting role in economic growth, while industrial products have negative effects t ; Finally the article put forward some related countermeasure proposal to improve the relations between the import structure and the Chinese economic growth. Keywords: Import Trade Structure, economic growth, import structure 1. Introduction With the development of the global economy integration, Foreign Trade growth has become a key effect to the national economy. The cognition of foreign trade, especially the import trade is deepened gradually: The import is not the method of regulate supplies only; the goal is no longer to satisfy the demand which can t be met by home supplies. The economy effect of import is complicated day by day, because of product technology content and types of product rose with the development of knowledge economy. China has an large scale of population and economic, after several dozens year development, the scale of Chinese import is booming, and the variety of the import product is expansion. Therefore, it is very important and significance to analyze the structure of Chinese import and its influence to Chinese economy in the rapid development process of import in China.. The Development of the Import Trade in China In 1978, China's import trade is billion dollars. After more than 0 years development, it arrives at billion dollars in 007; According to the data, with the wave of domestic economy, import trade presents periodical change, which shows that the effects of long-term supply do exist in China's import trade. [1] Corresponding researches indicate import contributes economic growth via factor supply, technical progress, gradual industry progress, institutional innovation, human capital and so on. Different import products include different factors, therefore, researches on the relationship between import and economic growth should not only be restricted to gross but seek the specific realization ways from congruent relationship between import structure and growth path. 3. Development and Change of the Structure of Import Trade Generally speaking, the main part of the structure of import trade is the structure of commodities. According to SITC (Standard International Trade Classification), commodities in international trade are classified into two categories, i.e. primary products and industrial products. Since 1980, the total amount of our import of primary products has increased in stability; after 004, primary products ratio is slightly 1 The paper supported by the young people research fund of ncut and the fund of academic degree and postgraduate education of Beijing. 187

2 higher than 0%, but the industrial products still stand in an absolute advantage in both absolute quantity and relative quantity of import trade. 3.1Development and Fluctuation of Import Industrial Products Since 30 years of policies of reformation and opening, quantity and proportion of our import industrial products are basically stable, but the inner structure of the import industrial products bear different features in different year. (See chart 1) Since China's policies of reformation and opening, total import of industrial products and each component have constantly increased. The amount of the imports of SITC5 SITC6 SITC7 SITC8 SITC9 Chart 1 Fluctuation of the proportion of the import industrial products (%) 1 industrial products has increased from hundred million dollars in 1978 to hundred million dollars in 007;its proportion of the total import has increased from 65.% in 1980 to 74.6% in 007.The leading products of import in China are capital intensive and technology intensive products. the imported machinery and transportation equipment occupy 6.13% of the total import in 1980 and 43.16% in 003, a dramatic increase of 17 percent points. They turn into the products with the fastest growth and the greatest proportion in the structure of import commodities. Such change indicates the localization ability of China's common processing industry is in the course of gradual improvement. As a result China's reliance on foreign raw material and intermediate products will wear off with gradual steps. At the same time, it also indicates with the ceaseless upgrade of the structure of domestic industry, the requirement for foreign advanced technology and complete equipment becomes increasingly more. 3. Fluctuation of Primary Products Import According to SITC classification, primary products are resource-intensive products, such as food, fuel, raw materials and so on. On our way to economic development, import of these products can effectively relive pressures on resource and lay a solid foundation for the development of economy. In 1980, proportion of SITC0, 14.6% is the highest in import; from 1987 to 1991, it reaches height again, however, its proportion decreases to 6-7% or so. After 1990s, with more than a decade's development, food in China can be self-sufficient, but some SITC0 products without comparative advantage or production are still required to import. Although the import proportion does not remarkably increase, because of the increase of the total volumes of imports, our food import dependency has been strikingly enlarged since 004 and its proportion reaches 4.9% in 006. The average annual import proportion of SITC is 9.4%, and it falls at an average speed of 0.4%. The increase of SITC3 is clear, about 0.5% from and 7.1% in 003. The proportion of SITC4 is always very low, averagely 0.3% and it tends to increase first and then decrease. Its import height mainly appears from 1989 to Case Analysis of the Relationship Between Structure of Import Trade and Economic Growth 188

3 4.1 Regression Analysis of Primary Products and Manufactured Goods Imports The research based on which, a simplest model(y=f(l,k,x)) can be established to measure the influence of imports on GDP. Y stands for GDP; L and K respectively stand for the input of labor and capital factors; X stands for the amount of imports and actually it is a variable added to original production function. [] Labor force, capital and GDP is not a linear relation but an exponential relation, but it can be translated into linear relation by taking logarithm and a specific model of multiple linear regression is as follows: LnY=β 0 +β 1 LnL+β LnK+β 3 LnX+U X in that model is replaced by variables of all kinds of import commodities and then linear relation model of classification for import commodities and GDP will be obtained [].Its result is shown in our countries import commodities: primary products play a positive and promoting role in economic growth, while industrial products have negative effects. Such result of regression has sounded the alarm for China's imports of industrial goods. For further analysis of the function that specific commodities of primary and industrial products play on economic growth and in order to better project the structure of import commodities to serve China's economic growth, imports of primary products and industrial products can be further subdivided according to the classification of SITC. (MP1-5 respectively correspond SITC0-4 and MM1-5 correspond SITC5-9) 4. Regression Analysis of Import Primary Products and GDP First, primary products are classified (MP1-5 respectively correspond SITC0-4) and their relationship with GDP is as follows: lny = lnL+0.656lnK+0.044lnMP1-0.08lnMP lnMP3+0.03lnMP lnMP5 t (.085) (9.0804) (0.584) (0.860) (0.0644) ) (0.9891) R =99.7% F= Overall inspection output of this regression equation is very ideal. Test values of R and F are both very big, which shows goodness of fit of model is very high. Therefore, in primary products imports, a very strong positive correlation exists between food MP1 and edible live animals, lubricating oil MP4 and relative raw materials, animal and vegetable oil MP5 and wax and economic growth. Another two kinds products import present negative relevance. But these two coefficients haven't been tested by "t ", i.e. Such negative relevance is not obvious. This conclusion is basically consistent with previous analysis of remarkable promoting function of primary products import on economic growth. 4.3 Regression Analysis of Import Manufactured Products and GDP Industrial products can also be classified according to SITC and the relationship between import volume of various type and GDP is as follows: lny = lnL lnK + 0.1lnMM lnMM lnMM3-0.81lnMM lnMM5 T (1.7943) (-.4305) (-.4660) (4.9655) (5.033) (.868) (0.8881) R =99.8% F= Values of R and F show that equation has goodness of fit and the test effect is ideal. Among imports of industrial products, chemicals and relative products MM1,textiles and other light industrial goods, rubber products, mining and metallurgy products MM, and machinery as well as transportation equipment MM3 show their contribution to economic growth, however, Miscellaneous manufactured articles MM4 and other unclassified products MM5 have negative effects on economic growth. It is mainly because MM1 and MM3 are capital and technology intensive products, which are relatively in shortage and disadvantage in China. Imports of MM1 and MM3 can promote improvement of technology and transformation of economic growth mode. MM is resource intensive products, whose import can relieve China's shortage of resources and to some extent, relieve the restrictive function of resources on economic growth and then import of resource intensive products play a positive role in 189

4 economic growth. On the contrary, MM4 is labor intensive products, which have comparative advantage in China. Imports of these products lead to competition with domestic products, so instead of regulating supplies, they will to some extent muscle in domestic market and work against economic growth. 5. Proposals of Optimizing Import Trade Structure and Promoting Economic Growth In present situation of import, although industrial products among imports keep a high position, as a kind of commodities, their effects on GDP are unexpectedly negative, which explains that our purpose of taking the advantage of import to urge economic growth has not been realized. In order to fully enhance our country's available technology stock, learn and grasp foreign advanced technology and raise labor productivity to allow a full play of commercial import trade in technical progress, we should increase the proportion of import commodities with high technology content and easy digestive absorption. Surly, to buy products with prices lower than these products value of new technology is the premise of increasing labor productivity through import [3]. 5.1 To Optimize the Structure of Manufactured Products Imports According to above results of case analysis, some suggestions for optimization of commodity structure are as follows: Be active to import advanced technology and key equipment. Because MM1 and MM3 are capital and technology intensive products and their import and the increase of China's GDP present positive correlation. Our country should enlarge the import of products with high technological content and actively introduce advanced technology and key equipment. Import capita with high technology content can increase capital production efficiency, which can be called technical progress effects of import trade. After the import of technical equipment, its absorption, digestion, transformation and improvement should be emphasized to foster new industries, transform conventional industries and urge the upgrade of the industrial structure to drive economic growth. 5.1.To be earnest to organize the imports of important goods: MM is resource intensive products whose import can relieve the shortage of resource in China, and to some extent, it can remove resources' restrictive effects on economic growth. Case analysis of the third part also shows its promoting effects on economic growth. Therefore we should earnestly organize imports of important construction goods, agricultural goods and materials, goods and materials to use imports to serve the exports; we should make full use of domestic and foreign markets and resources to import steel products, copper, aluminum, fertilizer, rubber and so on to promise smoothly running of the important construction and the development of agriculture. 5. To Optimize Structure of Primary Products Import Case analysis shows a positive correlation between primary products import and the increase of GDP. Nowadays, shortage of energy sources in China is getting more and more severe, so imports of some durable consumer goods and goods for daily consumption should be rationally enlarged. Firstly, under current situation of dramatic rise of international oil price, oil reserve fund should be collected in multilevel ways and energy source such as oil and gas should be abundantly bought into to enlarge stock of national energy, especially to enrich strategic reserves of energy to maintain national energy security. Secondly, it is to establish sound reserve system of national food and through moderate import, varieties structure of reserve system of food and quantity tend to be rational. At the same time, process of integrating domestic and foreign trade must be accelerated to make domestic food market in line with the international. The last suggestion is to transform concepts and vigorously drive the internationalization of development of mineral resources. First, we should encourage import of those minerals in shortage and have a long-term reserve; then import structure of minerals should be optimized to have a rational 190

5 and efficient transformation; and then strategies of mineral import and development as "world developing, keeping a foothold in Asian and Pacific area and laying emphasis on circumstances" should be established to rationally arrange area distribution of import and export markets, so as to stabilize the source and solve issues of supplies of mineral resources; the last is to encourage enterprises to "go out" by actively carrying out overseas investment and co-development and hold tightly initiative of price negotiations. 6. Conclusion The import of primary products not only provides raw materials for the economy growth, but also savings of resources within domestic resources, alleviate environmental pressures,therefore, China should expanded the scale of primary products fatherly, and improve its ability to cope with international competition and to prevent trade conflict. At the same time, the research on the effect of manufactured products imports to economy should be raised; especially the weakening effects problem of Chinese manufactured products imports to economy growth. So that, China can adjust the import policies according to the different products influences, and meet the goal of promoting the domestic economy growing by optimizing the structure of import. References [1]. ZHAI Dengfeng The econometric analysis of the supply effects on Chinese economic growth by import trade Contemporary Finance and Economics 008(3):96~101 []. Yu Cunping, An Analysis of the Structure of Foreign Trade in China and its Influence on the Economic Development[D], University of International Business and Economics, 004 [3]. Garrick Blalock&Fransico M. Veloso. Imports, Productivity Growth, and Supply Chain Learning. World Development,007(7): 1134~1151, 191