Exports, imports and economic growth in China: an ARDL analysis
| Pages | 42-55 |
| DOI | https://doi.org/10.1108/17544401211197959 |
| Date | 03 February 2012 |
| Published date | 03 February 2012 |
| Author | Qazi Muhammad Adnan Hye |
| Subject Matter | Economics |
Exports, imports and
economic growth in China:
an ARDL analysis
Qazi Muhammad Adnan Hye
Institute of Business Management (IOBM), Karachi, Pakistan
Abstract
Purpose – The purpose of this paper is to investigate the export-led growth, growth-led export,
import-led growth, growth-led import and foreign deficit sustainability hypothesis in the case of China,
using annual time series data from 1978-2009.
Design/methodology/approach – For estimation evidence this study employs the Phillips Perron
unit root tests to examine the level of integration and the autoregressive distributed lag (ARDL)
approach is employed to determine the long run relationship, and the direction of long run and short
run causal relationship is examined by using modified Granger causality test.
Findings – The results confirm the bidirectional long run relationship between the economic growth
and exports, economic growth and imports, and exports and imports. These findings guided the authors
to conclude that the exports-led growth, growth-led exports, imports-led growth and growth-led imports
hypothesis is valid, and foreign deficit is sustainable for China. The long run elasticities are as follows:
the elasticity of economic growth with respect to exports is 0.591, and elasticity ofexports with respect to
economic growth is 1.635. The elasticity of economic growth with respect to imports is 0.621, and
elasticity of imports with respect to economic growth is 1.392. Further more the elasticity of exports with
respect to imports is 1.322, and imports elasticity with respect to exports is 0.975.
Originality/value – This study utilizes the relative new cointegration method of ARDL approach.
The empirical findings of this study are vital for policy makers of China in the formulation of trade
policies.
Keywords China, Trade, Economicgrowth, Imports, Exports, ARDL
Paper type Research paper
Introduction
The process of economic reforms was started by the Government of China in 1978. The
main objective of these reforms was to boost the economic growth through enhancing
the efficiency and productivity of different sectors of the economy. The stable political
system, efficient utilization of natural resources and skilled labor force in China, has
made it a modern global factory. The adoption of trade liberalization policy in China is
experienced fast economic growth. The actual trade reforms in China are described by
the significant reduction of tariffs, imports restrictions and with the reallocation of
imports substituting outcome into export industries (Chow and Lin, 2002). These
motivated economic reforms aimed to lead China as an export-oriented country and the
expected results have been drawn. Figure 1 shows that China’s foreign trade has
increased steadily since the implementation of economic reforms. From the last 20 years
the annual international trade volume has grown annually at the rate of 18.1 percent
Republic of China ROC (2011). It climbed from US$21.08 billion in 1978
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
JEL classification – F43, C23, F15
JCEFTS
5,1
42
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 5 No. 1, 2012
pp. 42-55
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/17544401211197959
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