Managing Openness of the Chinese Economy to Sustain Its Economic Growth

Huiqun Liu

doi:doi:10.11648/j.jim.20150406.23

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Managing Openness of the Chinese Economy to Sustain Its Economic Growth

Huiqun Liu

Published in Journal of Investment and Management (Volume 4, Issue 6)

Received: 5 July 2015 Accepted: 11 July 2015 Published: 24 October 2015

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Abstract

Many studies suggest the positive causal effects of openness on productivity and growth. However, controversies are still prevalent among vast empirical studies on the issue. In this paper, we develop econometric models in the comprehensive framework to shed quantitative light on the implications of a scenario of deeper economic integration in China, where the barriers for trade and foreign direct investment (FDI) are preferentially eliminated. Different versions of the econometric models are specified and numerically implemented. Each provides a framework to experiment the relationship between economic growth and trade, FDI in China. Our findings include: first, both FDI and trade have positive impact on long-term economic growth and no effect on short-term economic fluctuation; second, the interactions between FDI and policy, trade openness and policy have significant impact on economic growth, and with the rapid growth of FDI and trade, their marginal effects on economic growth is reduced; third, the impact of FDI on TFP is positive, and trade openness is also showed positive effect on TFP under the role of FDI. All these findings suggest that openness is becoming an important drive force of China’s economic growth. It is necessary for Chinese government to manage openness to sustain its’ economic growth.

Published in	Journal of Investment and Management (Volume 4, Issue 6)
DOI	10.11648/j.jim.20150406.23
Page(s)	391-402
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Openness, Foreign Trade, Foreign Direct Investment, Economic Growth, China

References

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[2]	Blomstrom, M., A. Kokko, 1998, Multinational Corporations and Spillovers. Journal of Economic Surveys, Vol.12, pp.247-77.
[3]	C.A.Sims, 1980, Microeconomics and Reality, Econometrical Modeling Economics Series, Reprinted in C.W.J. Gramger, Ed., Clarendon Press, Oxford, Vol.48, pp.1-48.
[4]	Gorg, H., D. Greenaway, 2004, Much Ado about Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment? World Bank Research Observer, Vol.19, No.2, pp.171-97.
[5]	Guo Qingwang, Jia Junxue, 2004, Estimating Potential Output and the Output Gap in China, Economic Research, Vol.5:31-39 (in Chinese).
[6]	Jiang Yanqing, 2011, Understanding openness and productivity growth in China: An empirical study of the Chinese provinces, China Economic Review, Vol.22, pp.290–298.
[7]	Johansen, S, 1988, Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, Vol.12, pp.231-254.
[8]	John Whalley, Xian XIN, 2010, China’s FDI and non-FDI economies and the sustainability of future high Chinese growth, China Economic Review, Vol.21, pp.123-135.
[9]	Kishor K. Guru-Gharana, Deergha R. Adhikari, 2011, Econometric Investigation of Relationships among Export, FDI, and Growth in China: an Application of Toda-Yamamoto-Dolado-Lutkephol Granger Causality Test, Journal of International Business Research, Vol.10, No.2, pp.31-50.
[10]	Liu Liyan, 2011, FDI and Economic Development: Evidence from Mainland China, Journal of Service Science and Management, Vol.4, pp.419-427.
[11]	LIU Xiaming, Haiyan Song & Peter Romilly, 1997, An empirical investigation of the causal relationship between openness and economic growth in China, Applied Economics, Vol.29, pp.1679-1686.
[12]	Love, J., R. Chandra, 2005, Testing export-led growth in Bangladesh in a multivariate VAR framework. Journal of Asian Economics, Vol.15, pp.1155-1168.
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[14]	Mankiw, N.G., Romer, D., Weil, D.N.,1992, A contribution to the empirics of economic growth. Quarterly Journal of Economics, Vol.107, pp.407-437.
[15]	NBSC, 2012, China Statistical Yearbook, China Statistics Press, Beijing.
[16]	NBSC, 2005, China Statistical Yearbook, China Statistics Press, Beijing.
[17]	Qazi Muhammad Adnan Hye, 2012, Exports, imports and economic growth in China: an ARDL analysis, Journal of Chinese Economic and Foreign Trade Studies, Vol. 5 No.1, pp. 42-55.
[18]	Yao Shujie, 2006, On economic growth, FDI and exports in China, Applied Economics, Vol.38, No.3, pp. 339-351.
[19]	Zheng Jinghai, Arne Bigstern & Angang Hu, 2009, Can China’s Growth be Sustained? A Productivity Perspective, World Development, Vol. 37, No. 4, pp. 874-888.

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APA Style

Huiqun Liu. (2015). Managing Openness of the Chinese Economy to Sustain Its Economic Growth. Journal of Investment and Management, 4(6), 391-402. https://doi.org/10.11648/j.jim.20150406.23

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ACS Style

Huiqun Liu. Managing Openness of the Chinese Economy to Sustain Its Economic Growth. J. Invest. Manag. 2015, 4(6), 391-402. doi: 10.11648/j.jim.20150406.23

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AMA Style

Huiqun Liu. Managing Openness of the Chinese Economy to Sustain Its Economic Growth. J Invest Manag. 2015;4(6):391-402. doi: 10.11648/j.jim.20150406.23

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@article{10.11648/j.jim.20150406.23,
  author = {Huiqun Liu},
  title = {Managing Openness of the Chinese Economy to Sustain Its Economic Growth},
  journal = {Journal of Investment and Management},
  volume = {4},
  number = {6},
  pages = {391-402},
  doi = {10.11648/j.jim.20150406.23},
  url = {https://doi.org/10.11648/j.jim.20150406.23},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20150406.23},
  abstract = {Many studies suggest the positive causal effects of openness on productivity and growth. However, controversies are still prevalent among vast empirical studies on the issue. In this paper, we develop econometric models in the comprehensive framework to shed quantitative light on the implications of a scenario of deeper economic integration in China, where the barriers for trade and foreign direct investment (FDI) are preferentially eliminated. Different versions of the econometric models are specified and numerically implemented. Each provides a framework to experiment the relationship between economic growth and trade, FDI in China. Our findings include: first, both FDI and trade have positive impact on long-term economic growth and no effect on short-term economic fluctuation; second, the interactions between FDI and policy, trade openness and policy have significant impact on economic growth, and with the rapid growth of FDI and trade, their marginal effects on economic growth is reduced; third, the impact of FDI on TFP is positive, and trade openness is also showed positive effect on TFP under the role of FDI. All these findings suggest that openness is becoming an important drive force of China’s economic growth. It is necessary for Chinese government to manage openness to sustain its’ economic growth.},
 year = {2015}
}

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TY  - JOUR
T1  - Managing Openness of the Chinese Economy to Sustain Its Economic Growth
AU  - Huiqun Liu
Y1  - 2015/10/24
PY  - 2015
N1  - https://doi.org/10.11648/j.jim.20150406.23
DO  - 10.11648/j.jim.20150406.23
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 391
EP  - 402
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20150406.23
AB  - Many studies suggest the positive causal effects of openness on productivity and growth. However, controversies are still prevalent among vast empirical studies on the issue. In this paper, we develop econometric models in the comprehensive framework to shed quantitative light on the implications of a scenario of deeper economic integration in China, where the barriers for trade and foreign direct investment (FDI) are preferentially eliminated. Different versions of the econometric models are specified and numerically implemented. Each provides a framework to experiment the relationship between economic growth and trade, FDI in China. Our findings include: first, both FDI and trade have positive impact on long-term economic growth and no effect on short-term economic fluctuation; second, the interactions between FDI and policy, trade openness and policy have significant impact on economic growth, and with the rapid growth of FDI and trade, their marginal effects on economic growth is reduced; third, the impact of FDI on TFP is positive, and trade openness is also showed positive effect on TFP under the role of FDI. All these findings suggest that openness is becoming an important drive force of China’s economic growth. It is necessary for Chinese government to manage openness to sustain its’ economic growth.
VL  - 4
IS  - 6
ER  -

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Author Information

Huiqun Liu

School of Economics, Tianjin University of Commerce, Tianjin, China

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Plain Text BibTeX RIS

APA Style

Huiqun Liu. (2015). Managing Openness of the Chinese Economy to Sustain Its Economic Growth. Journal of Investment and Management, 4(6), 391-402. https://doi.org/10.11648/j.jim.20150406.23

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ACS Style

Huiqun Liu. Managing Openness of the Chinese Economy to Sustain Its Economic Growth. J. Invest. Manag. 2015, 4(6), 391-402. doi: 10.11648/j.jim.20150406.23

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AMA Style

Huiqun Liu. Managing Openness of the Chinese Economy to Sustain Its Economic Growth. J Invest Manag. 2015;4(6):391-402. doi: 10.11648/j.jim.20150406.23

Copy | Download

@article{10.11648/j.jim.20150406.23,
  author = {Huiqun Liu},
  title = {Managing Openness of the Chinese Economy to Sustain Its Economic Growth},
  journal = {Journal of Investment and Management},
  volume = {4},
  number = {6},
  pages = {391-402},
  doi = {10.11648/j.jim.20150406.23},
  url = {https://doi.org/10.11648/j.jim.20150406.23},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jim.20150406.23},
  abstract = {Many studies suggest the positive causal effects of openness on productivity and growth. However, controversies are still prevalent among vast empirical studies on the issue. In this paper, we develop econometric models in the comprehensive framework to shed quantitative light on the implications of a scenario of deeper economic integration in China, where the barriers for trade and foreign direct investment (FDI) are preferentially eliminated. Different versions of the econometric models are specified and numerically implemented. Each provides a framework to experiment the relationship between economic growth and trade, FDI in China. Our findings include: first, both FDI and trade have positive impact on long-term economic growth and no effect on short-term economic fluctuation; second, the interactions between FDI and policy, trade openness and policy have significant impact on economic growth, and with the rapid growth of FDI and trade, their marginal effects on economic growth is reduced; third, the impact of FDI on TFP is positive, and trade openness is also showed positive effect on TFP under the role of FDI. All these findings suggest that openness is becoming an important drive force of China’s economic growth. It is necessary for Chinese government to manage openness to sustain its’ economic growth.},
 year = {2015}
}

Copy | Download

TY  - JOUR
T1  - Managing Openness of the Chinese Economy to Sustain Its Economic Growth
AU  - Huiqun Liu
Y1  - 2015/10/24
PY  - 2015
N1  - https://doi.org/10.11648/j.jim.20150406.23
DO  - 10.11648/j.jim.20150406.23
T2  - Journal of Investment and Management
JF  - Journal of Investment and Management
JO  - Journal of Investment and Management
SP  - 391
EP  - 402
PB  - Science Publishing Group
SN  - 2328-7721
UR  - https://doi.org/10.11648/j.jim.20150406.23
AB  - Many studies suggest the positive causal effects of openness on productivity and growth. However, controversies are still prevalent among vast empirical studies on the issue. In this paper, we develop econometric models in the comprehensive framework to shed quantitative light on the implications of a scenario of deeper economic integration in China, where the barriers for trade and foreign direct investment (FDI) are preferentially eliminated. Different versions of the econometric models are specified and numerically implemented. Each provides a framework to experiment the relationship between economic growth and trade, FDI in China. Our findings include: first, both FDI and trade have positive impact on long-term economic growth and no effect on short-term economic fluctuation; second, the interactions between FDI and policy, trade openness and policy have significant impact on economic growth, and with the rapid growth of FDI and trade, their marginal effects on economic growth is reduced; third, the impact of FDI on TFP is positive, and trade openness is also showed positive effect on TFP under the role of FDI. All these findings suggest that openness is becoming an important drive force of China’s economic growth. It is necessary for Chinese government to manage openness to sustain its’ economic growth.
VL  - 4
IS  - 6
ER  -

Copy | Download