Download The Export of Machinery and Electronic Products and Economic

The Export of Machinery and Electronic Products and Economic
Growth of China
Yang Xin
School of Economics and Management ,Tsinghua University ,Beijing,China
Xuetou Liu
School of Economics and Management ,Tsinghua University ,Beijing,China
Abstract
We present an econometric model of China macro economy to study the influence of
export of machinery and electronic products on its economic development. The testing period results
show that over 95% endogenous variables’ relative error is less than 5%.And ,the simulation results
document that the driving degree of export of machinery and electronic products on China economy is
3.15,which means that China’s GDP will increase 2.613 billion RMB for China’s export of machinery
and electronic products increase 0.1 billion dollars. Also, the simulation results show that ,the total
export value of China in 1998 increase 2%,and the growth rate of total export value in 1999 is
-3.6%,which is similar to the actual situation .
Key words
international export ,economic development ,Machinery and Electronic Products
JEL Classification :C34;F34;F43
In a globalization era, the world economies are linked together deeply, Any countries .no matter for
the developed countries or under development countries ,benefit or suffer from the international
trade .Therefore, the world economies are greatly influenced by the international trade and financial
environment .For example ,during the Asian financial crisis ,the total value of global trade is 6500
billion dollars in 1998,which is 2% less than that of 1997.Also,several Asian countries’ economies
suffered from this serious shock. In addition to Japanese economic recession and decline of global
market demand ,both the export and import of
Asian countries declined .The influence of Asian
financial crisis goes throughout the world .According to the report of the World Trade
Association ,American import from Asian countries increased 9.5% last year ,and export declined
14%;while European Union import from Korea ,Thailand ,Indonesia ,Malaysia and Philippine
increased 12%,and export declined 40%.Because of the world market demand shrink of primary
products ,the trade value of Latin America, which was always growing in the last ten years ,declined at
the first time last year ,about 5.5% less than that of 1997,and the export value of Latin America also
declined 1.5%,so did the export value of Africa and middle east area .Thus ,the international trade
driven by the world economies also has its impact on the global economic development
(Little ,1982).Also, as an emerging and developing country ,China’s economy also can influence and be
affected by the world economy .In this paper ,we model the China macroeconomy model to study the
influence of export of machinery and electronic products on its economic development .
The machinery and
electronic
products
include machine
and
transport
instruments,
automobile ,watercraft , communication and office equipment ,electron and home appliance ,and so
on ,In the total global trade value ,machinery and electronic products trade grows rapidly since 1980’s.
About the proportion of machinery and electronic products trade ,it is about 1/5 in the 1950’s ,1/4 in the
1960’s and 1/3 during the 1970’s and the 1980’s. The machinery and electronic products trade value
throughout the world is 1940 billion dollars in 1995,which accounting for 43.9% of the full quota . At
present, the proportion of machinery and electronic products export in the full quota of Western
developed countries are all above 40%, for example, Japan reaches 80%.With the material
breakthrough of advanced technology and commercialize of harvest of technology ,the growth of
machinery and electronic products in global trade will be faster ,A prodigious proportion of machinery
and electronic products trade is advanced technology products. The machinery and electronic products
trade has a promising development prospect in the international trade .The developing countries should
introduce advanced technology and instruments from developed countries for national economic
development and shorten the interval with developed countries (Posner ,1961).Industrial system of
the native country should be established gradually by digesting and absorbing technology of developed
countries (Balass,1989).With the development of economy ,developing countries can also expand their
machinery and electronic products export ,which benefits to optimizing and upgrading the industrial
structure of developing countries ,persistent developing national economy and speeding economic
development all over the world finally.
1. China’s opening and the global economic development
Since its opening begun in 1979,China’s economic has been more and more dependence on the
world economy .And international trade has shown its great importance on the economic
development .Since its transition and opening ,the export increased from 9.75 billion dollars in
1978 to 183.76 billion dollars in 1998,that is 17.7 times totally and the average annual growth is
16%.During the Asian financial crisis ,China’s external trade value is 323.93 billion dollars in
1998,which is 0.4% less than that of 1997.Total import declined 1.5% and export increased
0.5%.The relation between China economy and global economy become more and more intimate .
According to the statistic of customs, the total native export was 183.76 billion dollars in
1998,machinery and electronic products export was 66.54 billion dollars ,which account for
40.8%,of the total finished products export value and 36.2% of the full quota ,as shown in Table
Ⅰ.
Table
Year
Ⅰ The summary statistics of annual export of China
Total export value
(100 Millions USD)
Machinery and electronic
products export value
Proportion of the
total value (%)
(100 Millions USD)
1978
97.5
6.5
6.7%
1990
620.9
110.9
18%
1995
1487.8
438.6
29.5%
1996
1510.5
482.1
31.9%
1997
1827.9
593.3
32.5%
1998
1837.6
665.4
36.2%
2000
2492.0
1053.0
42.2%
2002
3255.7
1570.8
48.2%
Among the machinery and electronic export ,process trade becomes the most dominating
trade style except for the general commodity trade .China process export reached 51.32 billion
dollars in 1998,which is 14.7% more than that of 1997 and account for 77.1% of machinery and
electronic products export value. Feeding process trade value is 38.87 billion dollars ,which
account for 58.4% of machinery and electronic products export value ,and process assembling
trade value is 12.45 billion dollars ,which account for 18.7% of machinery and electronic products
export value .While general export value is13.71 billion dollars ,which is 3.1% more than that of
1997 and account for 20.6% of machinery and electronic products export value ,as shown in Table
Ⅱ.
Table
Ⅱ Machinery and electronic products export in 1998
Trade style
Export value (Billion USD)
Proportion(%)
General trade
137.1
20.6
Process trade
513.2
77.1
Feeding process
124.5
18.7
Supplying process
388.7
58.4
Foreign capital enterprises are the major exporters of machinery and electronic products .In
1998, foreign capital enterprises export is 40.11 billion dollars ,which account for 60.3% of the
total machinery and electronic products export .And self-owned foreign
capital enterprises
export is 20.56 billion dollars ,which account for 30.9% of the total machinery and electronic
products export .
We can draw a conclusion from all the information above .That is ,foreign capital enterprises
machinery and electronic products export grow fast ,process trade boost quickly , machinery and
electronic products export of process trade style reached 51.32 billion dollars in 1998, which
account for 77.1% of the total China machinery and electronic products export.
All of these just elucidate that economic development of China in transformation and opening
motivates the global economic development at the same time .Economic globalization benefits to
the world economic development and will improve international trade powerfully .These exists
mutually boost relationship between transformation and opening of China and economic
globalization .Market opening of China provides fresh motivation to global economic
development .
2. The influence of machinery and electronic products export on China
economic development
2.1 The econometric model
In this section ,we model the China export structure for quantitative analysis of the influence of
machinery and electronic products export on China economic development (Wang, Li,
Li,1999).The econometric model includes 7 modules totally: production module ,national income
module , consumption and investment module ,price index module ,finance module ,export module
and import module .The model includes 75 variable totally, in which there are 61 endogenous
variables and 14 exogenous variables .There are 61 equations ,which include 41 stochastic
equations and 20 definition equations. Te sample date are collected from the Statistics Bureau,
which arranges from 1978 to 1997.
2.2
The simulation results
A. The testing period
We use the data from 1978 to 1996 to regress the econometric model ,and use the data in 1997 as
the testing period .The results show that over 95% of the endogenous variables’ relative error is less
than 5%. Thus ,the econometric model is satisfying and applicable, as shown in Table
Table
Ⅲ The testing period results
Ⅲ.
(Sample period ;1978~1996,Testing period :1997)
Module and variables
Actual value of 1997
Simulation results of 1997
Relative error (%)
1. production module
GVA
24587.0
22412.4
-8.84
GVE
9550.3
9912.4
0.63
GVHIS
48211.7
50495.8
4.66
GVHI
58062.0
60372.2
3.98
GVLI
55671.0
57976.6
-1.25
GVIN
113733.0
115348.8
1.42
GVCS
12462.6
12559.2
0.78
GVCM
10396.9
10521.1
1.19
GVTC
4812.5
4613.8
-4.13
GVS
165992.0
165455.0
0.32
13968.8
14274.1
2.19
36716.8
-0.15
VI1
VI2
36770.3
V13
24033.3
24007.3
VCS
5018.0
4961.0
-1.14
GDP
74772.4
74998.2
0.30
RATE
8.8
8.83
0.30
31752.3
31755.8
0.01
TMIRI
18086.4
17951.7
-0.74
TMIUI
18818.3
18632.1
-0.99
MIRI (RMB)
2090.0
2074.5
-0.74
MIUI(RMB)
5160.0
5180.0
-0.99
31309.0
31496.7
0.60
26143.9
4.82
VIN
-0.11
2. income module
3. consume and investment module
AC
GDI
24941.8
GDP
76077.2
76798.9
0.95
CRI
17940.5
18164.2
1.25
CUI
18177.3
18270.2
0.51
CFNSS
5453.9
5449.2
-0.09
12486.59
12741.99
1.83
CI
36117.8
36436.4
0.87
CS
8650.4
8867.8
2.51
CONS
44768.2
45302.2
1.19
CFSS
4. finance module
DFR
8561.44
8542.32
-1.26
TEXP
9233.56
9337.29
1.12
RISD
10078.8
9896.0
-1.18
UISD
36201.0
36624.4
1.17
2431.0
2506.2
3.10
EDCCD
28656.3
28468.1
-0.66
VKD
82390.3
81801.2
-0.72
LOAN
74914.1
71921.1
-4.0
14704.6
-1.18
27114.2
-0.68
184.3
0.44
GBD
5. price index module
TRMC(present price)
14880.7
TRMCC(fixed price)
27298.8
PIACC
183.5
6. export module
XX01(100 million USD)
121.2
121.7
0.41
XX24(100 million USD)
48.4
45.8
-5.49
XX3(100 million USD)
69.9
69.2
-1.02
XXGE(100 million USD)
593.27
578.82
-2.40
XXIN(100 million USD)
1588.4
1602.9
0.91
XX56S(100 million USD)
995.1
1024.1
2.91
XX(100 million USD)
1827.9
1839.7
0.65
PXX01
140.30
142.91
1.86
PXX02
139.40
139.53
0.09
PXX3
161.30
164.43
1.94
PXX59
131.11
134.02
2.22
7. import module
MM01(100 million USD)
46.24
52.00
12.46
MM24(100 million USD)
136.89
134.74
-1.57
MM3(100 million USD)
103.06
101.55
-1.47
MM59(100 million USD)
1137.22
1136.14
-0.10
MM(100 million USD)
1423.71
1424.43
0.05
B. The influence of machinery and electronic products export on China economic development
Different commodity export has different influence on national economy. For example, the
export of farm produce ,which refers to few industrial processes, has weak influence on national
economy. However, the influence of manufacturing department products export is much
stronger .The degree of export of machinery and electronic products drives China economy is
usually bigger than that of other products .According to the statistics from Japan ,The degree of
export of whole set instrument export drives Japan economic development is 3.37.
The degree of some products drives national economy is the ratio of one kind of product
export increase and the GDP increase driven by this kind of products increase. The degree of
export of machinery and electronic products drives national economy is very strong ,and have
society benefit, which is much bigger than that of general primary products .
If the exchange rate is 1 USD=8.29 RMB, machinery and electronic products export
increase 0.1 billion dollars, then GDP grow 2.613 billon RMB, which is 0.315 billion dollars.
Therefore ,the degree of export of machinery and electronic products drives national economy is
3.15, as shown in Table
Ⅳ.
Table
Ⅳ The driving degree of export of machinery and electronic products on national economy
Primary variables
The influence of every 0.1 billion dollars increase of machinery
and electronic products export (100 million RMB)
GDP
26.13
VIZ
16.91
GVS
69.43
AC
10.76
CONS
9.24
MM
2.38
GDI
4.78
DFR
2.56
TEXP
2.78
The driving degree on
national
3.15
economy
The simulation study shows that ,China total export value grow 2% in 1998 comparing with
1997 under the infection of the Asian financial crisis. While the growth of China total export value
is -3.6% in 1999, which is much lower than that of 1997 to 1996 21.0%. This shows that China
export trade structure can reflect the movement of global trade environment. Though there exists
difference between the calculate result and the actual growth 0.5% of China export in 1998, this
reflects the trend of movement of China external trade.
3. Conclusion
In this paper, we present an econometric model of China macro economy to study the influence
of export of machinery and electronic products on its economic development .The model combines
41 stochastic equations and 20 defining equations, which consist of 75 variable (61 endogenous
variables and 14 exogenous variables). The econometric model is regressed with the sample data
arranged from 1978~1996, and tested with 1997. The testing period results show that over 95%
endogenous variables’ relative error is less than 5%. Then, we use this model to look on the
influence of export of machinery and electronic products on China’s economic development . The
simulation results document that the driving degree of export of machinery and electronic products
on China economy is 3.15, which means that China’s GDP will increase 2.613 billion RMB for
China’s export of machinery and electronic products increases 0.1 billion dollars .Also ,the
simulation results show that , the total export value of China in 1998 increase 2%,and the growth
rate of total export value in 1999 is -3.6% , which is similar to the actual situation .The results
show the importance of the machinery and electronic products trade. The developing countries ,i.e.
China, should be introduced advanced technology and instruments from developed countries for
national economic development .With the development of economy ,developing countries can also
expand their machinery and electronic products export, which benefits to optimizing and
upgrading its industrial structure to maintain its continual development ,which will also benefits
the world economy.
References
[1] Balass,B.1989,Comparative advantage ,trade policy and development .New York: New
York University Press.
[2]Little, I..M.D.1982.Economic development : Theory, policy and international relations, New
York : Basic Books.
[3]Posner, M.V.1961. International trade and technical change. Oxford Economic Papers ,12.
[4]Wang Huijiong, Li Boxi, Li Shantong .1999. The macroeconomic model of China 1999.
Beijing :China Finance and Economics Press. (in Chinese)