Analysis of Impact Mechanism of Foreign Trade on Real Economy in China

Abstract

There is close relationship between foreign trade and economy growth. China’s export trade and import trade develop rapidly and foreign direct investment is becoming more and more since China’s reform and opening up which can make impact on China’s real economy development. The impact mechanism of foreign trade on real economy in China has been analyzed by using yearly data from 1982 to 2009 based on China’s actual development and theory of foreign trade and economy growth. The results show that there is cointegration relationship between China’s real economy and foreign trade in the long term as well as causality in the short term and the impulse response of China’s real economy to foreign trade is sensitive. It indicates that foreign trade can promote China’s real economy growth. According to the international competition of foreign trade, China should focus on adjustment of trade structure and improve the quality of export products.