Trade Effect of the Free Trade Zone

Chao Zhou,Ying Su

doi:10.5539/ibr.v14n1p34

Abstract

Facing to the increasingly complex international environment and the new normal of China&#39;s economic growth, the pilot of free trade zone is an important measure for China to further deepen reform and opening up. Promoting trade liberalization is an important part of the construction of the free trade zone. Based on the city panel data from 2004 to 2018, this paper analyzes the trade effects of 11 free trade zones established in 2017 and before by using the method of period by period did. Also the trade effect of each free trade zone is analyzed separately by the method of synthetic control.The results show that, firstly, the free trade zone has obvious trade promotion effect on total trade and export trade, but not on import trade. Second, the trade promotion effect of the pilot free trade zone is not significant in the eastern region, but there is an obvious trade promotion effect in the central and western regions. Thirdly, the analysis of each pilot free trade zone also shows some heterogeneity. Generally speaking, the trade effect of export is greater than that of import.Specifically speaking, the pilot free trade zone shows certain heterogeneity, which may be related to the local economic development level and econnmic scale.

Highlights

Since China's reform and opening up, the three major driving forces of economic growth are export, investment and consumption
By the end of 2018, the number of newly established foreign-funded enterprises, the actual use of foreign capital, and the proportion of total import and export in China increased by 15.54%, 12.12% and 12.25% respectively by the end of 2018.whether the FTZs have led to the growth of local trade? What are the mechanisms of these FTZs driving the growth of trade? Are there any heterogeneity among the pilot free trade zones? These all need to be investigated, which is the focus of this paper
This section plans to use the differerce in difference method to check the policies of the pilot Free Trade Zone, and conduct benchmark regression according to equations (1) - (3)

Summary

Introduction

Since China's reform and opening up, the three major driving forces of economic growth are export, investment and consumption. In order to further promote economic growth and better conform to international trade rules, China's pilot free trade zone has been rapidly promoted as a test field of reform and opening up. China has established 21 pilot free trade zones. This paper analyzes the import and export situation of the 11 early established free trade zones. By the end of 2018, the number of newly established foreign-funded enterprises, the actual use of foreign capital, and the proportion of total import and export in China increased by 15.54%, 12.12% and 12.25% respectively by the end of 2018.whether the FTZs have led to the growth of local trade? By the end of 2018, the number of newly established foreign-funded enterprises, the actual use of foreign capital, and the proportion of total import and export in China increased by 15.54%, 12.12% and 12.25% respectively by the end of 2018.whether the FTZs have led to the growth of local trade? What are the mechanisms of these FTZs driving the growth of trade? Are there any heterogeneity among the pilot free trade zones? These all need to be investigated, which is the focus of this paper

Literature Review and Typical Facts

Empirical Results and Robustness Test

Model design of synthetic control method

Empirical analysis of the heterogeneity of each pilot free trade zone