China integrates Asia with the world: an empirical study

Abstract

Purpose – The aim of this paper was to focus on China’s economic integration with Asia region and the world. It also attempts to find the long-run relation with short-run dynamics of China’s trade in Asia and the world. Design/methodology/approach – The augmented Dickey–Fuller and Phillips–Perron methods are applied to test the time-series properties of the variables. Co-integration technique is used to detect the economic integration of China’s export to the USA and its import from Asian nations using monthly aggregate data from December 2005 to July 2010. Findings – This study observed that empirically China’s export to the USA depends on exchange rate and China’s import from Asia depends on China’s export to the USA. China has double role in international trade – China acts as an attractor of all inputs from Asia, and China exports the final products in international market. This study also reveals that the speed of China’s import from Asia is faster than that of China’s export to the USA. Research limitations/implications – This study has some limitation in terms of data availability, and choice of methodology like the Gravity model Practical implications – The results imply that China’s trade should be treated as an engine of growth in the Asian developing countries and the trade promotion policies should be encouraged. The emerging China will create other opportunities through trade integration with Asia and the world. Social implications – These empirical findings will help policy-makers formulate their policy and design the mechanism for application as per their targets. Originality/value – China is economically integrated with the region and the world. The paper contributes to measure the speed of China’s export and import in short run within Asia and the world. These empirical findings will help policy-makers to formulate their policy and design the mechanism for application as per their targets.