The premise of foreign trade multiplier theory is that China has enough idle resources, and the domestic economy is in a state of insufficient employment balance. These basic premises exist in China. The existence of idle resources and underemployment provides the possibility and necessity for expanding exports.
By expanding export demand, the idleness of domestic labor and other resources can be effectively solved, and the continuous expansion of export demand will not compete with domestic industries for resources. On this premise, China's foreign trade has played a positive role in economic growth and employment.
The promotion of China's foreign trade to economic growth is also manifested in the fact that trade expansion has broken through the constraint of economic growth on factor input. From the perspective of investment, long-term economic growth depends on the improvement of savings rate and investment rate and the continuous progress of technology. For developing countries, if many technologically advanced machinery and equipment and key investors need to rely on imports, foreign exchange will become an important factor restricting economic development. According to the "two-gap model" of Chenery and Strout, there are investment and savings gaps and foreign exchange gaps in the economic development of developing countries, and China is no exception. Since the reform and opening up, China has obtained a large amount of foreign exchange by encouraging a large number of exports and imports of necessary technical equipment, thus promoting industrial upgrading and economic growth. From this perspective, the contribution of China's foreign trade to economic growth.
The dedication is enormous.
However, China's foreign trade multiplier is small, and overall, the effect of foreign trade on economic growth is limited, which has many reasons.
First of all, the theory of foreign trade multiplier is applicable to countries with perfect market mechanism. Only by giving full play to the market mechanism can foreign trade export have a chain effect on domestic industries, and the virtuous circle of export sector income expansion → consumption expansion → production income expansion of other departments → further consumption expansion → national income doubling can play a role. China has been in a state of planned system for a long time, and only since 1994 did China gradually transition to a socialist market economy system. The lack of a market mechanism in which foreign trade plays a role greatly limits the promotion of foreign trade exports to the national economy.
Secondly, a reasonable national economic structure is a necessary condition for export growth to constitute the driving force of economic development. China's long-term dual economic structure has caused an excessive tilt in resource allocation. The use of resources in some export sectors is at the expense of production in other domestic sectors, cutting off all necessary economic and technological channels for export growth to transmit power to the economy, and the traction of export growth is extremely limited. The recent economic turmoil in some Southeast Asian countries also shows from one aspect that whether foreign trade can make a beneficial contribution to the national economy is directly related to the domestic economic and trade restructuring ability.
Third, the promotion of export to economic growth depends on the nature of the production function of export products and the degree of correlation between the production department of export products and other sectors of the domestic economy in production, technology and market exchange. China's comparative advantage in the world mainly lies in its abundant labor resources. Although the country has been committed to promoting the export of capital and technology-intensive products, so far, the export products are mainly labor-intensive products. These products are low in technology, and other departments are processing trade products in export.
In recent years, the export volume of China's processing trade has reached more than 50% of the total export volume. Processing trade exports only charge workers' fees, and the added value is not high. Although this is also an organic part of GDP, China's processing trade mainly uses imported inputs for processing and then exports, which has little correlation with other domestic industries, so it is difficult to make great contributions to economic development through multiplier effect.
Finally, the proportion of China's net exports to GDP is very small, and the contribution of net exports to GDP is relatively small. As can be seen from Table 3, the proportion of China's net exports of goods and services to GDP is very low, with the highest value not exceeding 4%, which makes the contribution of net exports to GDP very small, as shown in Table 4. The data in Table 4 reflects the proportion of consumption, investment and net export increment in the GDP increment of that year. Obviously, the contribution of net exports to GDP is far less than consumption and investment, and China's economic growth mainly depends on the stimulation of consumption and investment demand.