An Analysis of Chinese Trade and FTA using Gravity Model

This paper assesses the impacts of the Free Trade Agreement on the volume of both the import and export of China and FTA countries or districts. We used a gravity model with dummy variables for China and each Chinese FTA partner country to account for the specificities of particular trade relations. By using the relevant theories and methods for the trade gravity model, we estimate a pooled cross-section model with data for 33 countries or districts over 15 years. The result indicates that the GDP, per capita GDP, distance, FTA, and language are the main factors that influence the volume of the import and export between China and FTA countries. In conclusion, FTAs will promote trade between China and FTA countries, increasing the amount of trade. China should build more FTAs with other countries to strengthen its communication and cooperation in the economic and trade areas, bringing China’s own comparative and competitive advantages into full play while removing obstacles to investment and trade to gain more economic benefits