Analysis of China's foreign trade with augmented gravity panel data model

Thesis Type: Postgraduate

Institution Of The Thesis: Middle East Technical University, Turkey

Approval Date: 2013

Thesis Language: English

Student: Rahmet Uslu

Supervisor: AYSIT TANSEL


The rapid transition of China from a closed agricultural society to an industrial powerhouse has been associated mainly with a rapid increase in the share of China in the world trade. The basic objective of this study is to analyse the foreign trade of China with its trading partners via Extended Gravity Panel Data Model to assess whether some main economic indicators have any effect over its bilateral trade relations. These economic indicators are gross domestic product of China and its trading partners, gross domestic product per capita and free trade agreements made between China and its trading partners to increase bilateral trade. These factors are believed to have explanatory power for China’s foreign trade. They are analyzed within the framework of augmented gravity model. In addition the the bilateral trade relations’ success depens on social relations such as the existence of common language. Further, the existence of a common border and the distance between the countries are also included within the model. As a result of the analysis, the main economic indicators are found to have a high importance in increasing the bilateral trade of China.On the other hand, the absence of a common language, common border and a long distance between the trading partners are found to reduce the bilateral trade between China and its trading partners.