Factors Driving Openness in China Trade: Corruption, Exchange Rate Volatility, and Macro Determinants

Thong Trung Nguyen (), Toan Luu Duc Huynh and Wing-Keung Wong
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Thong Trung Nguyen: School of Banking, University of Economics Ho Chi Minh City, Vietnam
Toan Luu Duc Huynh: School of Banking, University of Economics Ho Chi Minh City, Vietnam

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2021, vol. 24, issue 02, 1-25

Abstract: Trade openness plays a critical role in the growth of China and its partners. Using a system generalized method of moments (system GMM) estimator and quantile regression, a new viewpoint is presented on trade openness in China for institutional and economic factors over 15 years with 192 economies. The empirical findings provide two contrasting views. Intriguingly, China is seeking to broaden this strategy to countries with less control over corruption and low political stability. By categorizing countries as advanced, emerging, and developing, the study provides the evidence that exchange rate volatility has a negative effect on trade openness, while investment, labor force, and broad money share a positive impact. This study suggests that Chinese policymakers should further boost financial reform to promote trade development. Other countries desirous of greater trade openness with China should have more efficient management of macroscopic economic factors. Finally, the study also examines the two main groups of international offshore financial center from econometric convergence test and club clustering for trade openness in China from the worldwide perspective.

Keywords: China; trade openness; macro determinants (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S0219091521500168

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