Relationship between Tea Export and Major Macroeconomics Variables in China

Abstract

Along with the impact of the COVID-19, China's import and export trade suffered a huge impact in 2020. Among them, tea exports have seen a rare decline. In order to recover the tea industry, this study analyzes the factors influencing China's tea exports. In economic theory, macroeconomic variables occupy an important position, and they allow a reliable assessment of the overall development of the industry at the macro level. In this paper, several macroeconomic variables from 2013 to 2021 are selected and used as independent variables, and the tea export volume in the same period is used as the dependent variable for regression analysis. However, the calculation of VIF revealed that the conventional multiple linear regression would be disturbed by multicollinearity, leading to unsatisfactory results. Considering the problem of multicollinearity, this study uses ridge regression and K-folds cross validation for processing and derive the corresponding ridge regression coefficients so that the significance of each variable can be examined. The results of the analysis are that GDP is most closely related to tea exports, while population size and local tea production are slightly less closely related, and exchange rate is the least related variable.