Determinants of China's textile exports: An analysis by gravity model

Abstract

An abundant supply of raw materials and low-cost labour made China the world's largest producer and exporter of textile products since 2000. The value of China's textile exports to the world amounted to approximately US$ 34 billion in 2004, which represented about 16% of the world's total textile exports. Taking the data from 1985 to 2004, the country-specific factors for textile exports between China and its top 10 trading partners were analyzed statistically using the gravity trading model to identify effects of the major determinants that underpin the textile exports of China. The result renders robust support for the gravity model and shows that GDP, real exchange rate, common membership of free trade agreement for bilateral trading partners, per capita GDP and population growth rate of the importers, all these factors, have shown statistical significance on the China's textile exports. On the contrary, geographical distance has no significant effect on textile trading.