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PROGRAM | Economics

The Transformation of China’s Trade Strategy under The New Economy

By: Zhongli Zhang Chair: James Butkiewicz

ABSTRACT

 China implemented an export-oriented trade strategy with the goal of maximizing its trade surplus and foreign exchange reserves. After more than 30 years of rapid economic growth,  the economic growth rate has gradually changed from high-speed growth to medium growth. The shortage of a surplus labor force and the aging problem make China lose its comparative advantage in some industries. Rapid urbanization and the increasing proportion of the middle class make the domestic market have greater consumption potential. China adjusts its fertility policy,  from strictly limiting one child per family to encouraging two or three children per family. These characteristics at the current stage inspire leaders to review the export-oriented strategy,  taking the initiative to expand imports which may drive technological progress and economic growth.

In this paper, I applied the threshold regression model to the traditional growth model,  using the data relevant to the labor market, urbanization, and fertility rate respectively,  to delineate different economic development stages. As the dependent variable,  the real GDP per capita growth rate is taken on an annual basis which is used to reflect the different effects of net exports on economic growth on each side of a threshold. This paper supports the adjustment of trade strategy to meet the current economic and social characteristics and promote economic growth.

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