Financial development and changes of China's foreign trade structure

Abstract

The purpose of this paper is investigation the relationship between financial development and foreign trade in China using categorized data via SITC (Standard International Trade Classification) one-digit codes. The empirical method is co-integration test. The empirical results provide clear support for the hypothesis that different industries' trade growth has different dependence on financial support. The financial development influenced capital intensive and technological intensive commodities more than others, but price and world economic status influenced primary products' foreign trade notably. The policy implications is government intervention can be called for to help efficient but financially constrained firms to overcome hinders that prevent them from entering international markets and expand their activities abroad. © 2011 Springer-Verlag Berlin Heidelberg.