Journal of Commerce and Accounting Research

Open Access Open Access  Restricted Access Subscription Access
Open Access Open Access Open Access  Restricted Access Restricted Access Subscription Access

Rapid and Phased Trade Liberalisation Pathways to Economic Growth: Evidence from China and India


Affiliations
1 Professor, Business Administration Discipline, Khulna University, Khulna, Bangladesh
2 Assistant Professor, Human Resource Management Discipline, Khulna University, Khulna, Bangladesh and Doctoral Researcher, Adam Smith Business School, University of Glasgow, United Kingdom
     

   Subscribe/Renew Journal


This paper investigates the hypothesis that there is an association between increased levels of trade liberalisation and economic growth through a comparative analysis of two giant emerging economies of the world – India and China. For this purpose the paper examines trends in GDP growth and various trade openness measures via empirical analysis of time-series data of the last 43 years, based on eight key indicators to compare the experiences of the two countries. These indicate that rapid and gradual trade liberalisation of both the countries, coupled with supporting economic, institutional, and infrastructural reforms, and advancement in technology led to the linking of these giants with the global markets, which has significantly contributed towards their economic growth, thereby supporting the phenomena that there is a significant positive relationship between liberalisation and economic growth. While China was seen to be experiencing growth, India was also on the right track. Indicators of both liberalisation and growth reveal that both the countries enhanced their economy significantly as they embraced international trade through trade reforms and economic liberalisation.

Keywords

Trade Liberalisation, Economic Growth, India, China
Subscription Login to verify subscription
User
Notifications
Font Size


  • Alamgir, J. (1999). India’s trade and investment policy: The influence of strategic rivalry with China. Issue and Studies, 35, 105-133.

  • Alfonso, O. (2001). The impact of international trade on economic growth. Working Paper produced under the Doctoral Program in Economics at Faculty of Economics, University of Porto.

  • Amiti, M., & Konings, J. (2007). Trade liberalization, intermediate inputs and productivity. American Economic Review, 97(5), 1611-1638.

  • Balassa, B. (1977). Policy reforms in developing countries. Pergamon Press, Oxford.

  • Bandara, J. S., & McGillivray, M. (1998). Trade policy reforms in South Asia. World Economy, 21(4), 881-896.

  • Barro, R. J., & Sala, X. (1997). Technological diffusion, convergence, and growth. Journal of Economic Growth, 2(1), 1-27.

  • Ben-David, D. (1995). Convergence clubs and diverging economies. Working Paper, Foerder Institute, Tel Aviv University, 402-95.

  • Ben-David, D. (2000). Knowledge dissemination, capital accumulation, trade, and endogenous growth. Oxford Economic Papers, 52(4), 637-650.

  • David, M. B., & Loewy, B. (1995). Free Trade and Long Run Growth. Discussion Paper, 1183, Center for Economic Policy Research, London.

  • Ben-David, M. B., & Loewy, B. (1998). Free trade, growth and convergence. Journal of Economic Growth, 3, 143-170.

  • Ben-David, M., & Loewy, B. (2000). Knowledge dissemination, capital accumulation, trade, and endogenous growth. Oxford Economic Papers, 52(4), 637-650.

  • Bhagwati, J. N. (1986). Rethinking Trade Strategy. In John P. Lewis (Ed.), Development Strategies Reconsidered, Overseas Development Council, US Third World Policy Perspectives, no. 5.

  • Bhagwati, J. N. (1988). Export promoting trade strategy: Issues and evidence. World Bank Research Observer, 3(1), 27-58.

  • Bose, T. K., Islam, S. S., Rahman, R., & Bristy, J. F. (2017). FDI fostering LDC and emerging economies – Fact or myth – Investigation on Bangladesh. Journal of Commerce and Accounting Research, 6(1), 10-25.

  • Bose, T. K. (2016). Critical success factors of SME internationalization. Journal of Small Business Strategy, 26(2), 87-109.

  • Bose, T. K., & Bristy, J. F. (2017). Are countries participating into regional integration performing better in growth and liberalization than non-participators? A study on European countries. International Journal of Business and Management, 171-198.

  • Bose, T. K., Uddin, M. R., Bristy, J. F., & Haque, M. E. (2021). Country and firm specific positions of different MNE types. European Journal of International Management, 15(1), 112-134.

  • Bose, T. K., & Mannan, J. (2015). Management competencies of female entrepreneurs of Khulna city, Bangladesh. Journal of Entrepreneurship and Management, 5(3), 28-39.

  • Bose, T. K., & Roy, R. (2017). SME financing sources and effects of financing sources on SME activities in Khulna city. Journal of Entrepreneurship and Management, 6(1), 12-22.

  • Bose, T. K., Dimitratos, P., & McDonald, F. (2018). Effect of location on entrepreneurship. In Beaverstock, J., Cook, G., Johns, J., McDonald, F., and Pandit, N. (eds.). The Routledge Companion to the Geography of International Business (pp. 375-393). Routledge: London. ISBN 9781138953345.

  • Bose, T. K., Dimitratos, P., & Tang, Y. K. (2019). Institutional framework and networking of exporting agricultural SMEs in Bangladesh. University of Glasgow.

  • Bose, T. K., Gain, N., & Bristy, J. F. (2016). Financing of agricultural SMEs in rural Bangladesh. Asian Research Journal of Business Management, 3(3), 47-55.

  • Bose, T. K. (2012a). Advantages and disadvantages of FDI in China and India. International Business Research, 5(5), 164-174.

  • Bose, T. K. (2012b). Constraints of SME development in Khulna city (1st ed.), LAP Lambert Academic Publishing GmbH & Co. K. ISBN: 978-3-8484-1016-3.

  • Bose, T. K., & Uddin, M. R. (2013). International trade: Opened the door of creativity, exploitation, expansion and diversification: A case study on automobile giant Toyota. Green University Review, 3(3), 57-62.

  • Bose, T. K., & Uddin, M. R. (2014). Surge in SME, surge in economy – An exploratory analysis. International Journal of Economics and Business Research, 8(4), 815-826.

  • Bose, T. K., & Nasira, S. (2016). Are motivations behind women entrepreneurship is identical in metros and smaller cities of developing countries? A study on Dhaka and Khulna city of Bangladesh. Journal of Entrepreneurship and Management, 5(1), 34-57.

  • Bose, T. K., & Bristy, J. F. (2016). Working together locally-performing better internationally: Alliance-FSAs-SME internationalization. Journal of Entrepreneurship and Management, 5(2), 1-13.

  • Bristy, J. F., & Bose, T. K. (2017). GDP-GNP gap trade-off – Is it significant for economic performance: Review of world economies having both gaps. International Journal of Accounting and Financial Reporting, 7(1), 153-170.

  • Bruno, M. (1993). Crisis, stabilisation, and economic reform. Clarendon Press, Oxford.

  • Bustos, P. (2011). Trade liberalization, exports, and technology upgrading: Evidence on the impact of MERCOSUR on Argentinian firms. The American Economic Review, 101(1), 304-340.

  • Cheng, T. C., Bose, T. K., & Fan, Y. (2021). Country institutional environments in promoting entrepreneurship: Assessment based on developing economies in Asia. Journal of East West Business, 1-25.

  • Choia, C. H., & Kim, J. W. (2014). Determinants for macroeconomic factors of antidumping: A comparative analysis of India and China. The International Trade Journal, 28(3), 229-245.

  • Coe, D., Helpman, E., & Hoffmaister, A. (1997, January). North-South R & D spillovers. The Economic Journal, 107, 134-149.

  • Coe, D., & Helpman, E. (1995). International R & D spillovers. European Economic Review, 39, 859-887.

  • Corden, W. M. (1987). Protection and liberalisation: A review of analytical issues. IMF Occasional Paper, 54.

  • Daumal, M. (2013). The impact of trade openness on regional inequality: The cases of India and Brazil. The International Trade Journal, 27(3), 243-280.

  • De Long, J., Bradfor, J., & Lawrence, H. (1991). Equipment investment and economic growth. Quarterly Journal of Economics, 106(2), 445-502.

  • Dickel, P., Kleemann, L., & Bose, T. K. (2019). How does context influence entrepreneurship education outcomes? Empirical evidence from Bangladesh and Germany. International Journal of Entrepreneurial Venturing, 11(3), 283-308.

  • Dodzin, S., & Vamvakidis, A. (2004). Trade and industrialization in developing economies. Journal of Development Economics, 75(3), 319-328.

  • Dollar, D. (1992). Outward-oriented developing economies really do grow more rapidly: Evidence from 95 LDCs, 1976-85. Economic Development and Cultural Change, 14, 523-544.

  • Dollar, D. (1993). The case for trade liberalization in developing countries. Journal of Economic Perspectives, 6, 69-86.

  • Dollar, D., & Kraay, A. (2001). Trade, growth and poverty. Development Research Group, The World Bank, No. 2615.

  • Dornbusch, R. (1991). Trade orientation, distortions, growth in developing countries. Journal of Development Economics, 39, 31-57.

  • Dornbusch, R. (1992). The case for trade liberalization in developing countries. The Journal of Economic Perspectives, 6(1), 69-85.

  • Edwards, S. (1989). Real exchange rates, devaluation and adjustment: Exchange rate policy in developing countries. Cambridge, MA: MIT Press.

  • Edwards, S. (1998). Openness, productivity and growth: What do we really know? Economic Journal, 108, 383-398.

  • Ekanayake, E. (1999). Exports and economic growth in Asian developing countries: Cointegration and error-correction models. Journal of Economic Development, 24(2), 43-56.

  • Enrico, M., & Signorelli, M. (2013). China and India: Openness, trade and effects on economic growth. The European Journal of Comparative Economics, 8(1), 129-154.

  • Falvey, R., & Kim, C. D. (1992). Timing and sequencing issues in trade liberalisation. Economic Journal, 102(413), 908-924.

  • Feder, G. (1983). On exports and economic growth. The Journal of Development Economics, 12(1), 59-74.

  • Frankel, J. A., & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89(3), 379-399.

  • Ghosh, P. K., & Bose, T. K. (2012). Constraints obstructing smooth operation of capital market in Bangladesh and probable solutions to those constraints - An empirical study based on investors perception. Indian Journal of Finance, 6(10), 39-53.

  • Goldberg, P., Khandelwal, A., Pavcnik, N., & Topalova, P. (2010a). Imported intermediate inputs and domestic product growth: Evidence from India. The Quarterly Journal of Economics, 2010a, 125(4), 1727-1767.

  • Goldberg, P., Khandelwal, A., Pavcnik, N., & Topalova, P. (2010b). Multi-product firms and product turnover in the developing world: Evidence from India. The Review of Economics and Statistics, 2010b, 92(4), 1042-1049.

  • Greenaway, D., Morgan, W., & Wright, P. (1997). Trade liberalization and growth in developing countries: Some new evidence. World Development, 25(11), 1885-1892.

  • Grossman, G., & Helpman, E. (1990). Comparative advantage and long-run growth. American Economic Review, 80(4), 796-815.

  • Grossman, G., & Helpman, E. (1991). Innovation and growth in the global economy. Cambridge, Mass: MIT Press.

  • Harrison, A. (1996). Openness and growth: A time series, cross-country analysis for developing countries. Journal of Development Economics, 48, 419-447.

  • Harrison, A., Leslie, A., & Nataraj, S. (2013). Learning versus stealing: How important are market-share reallocations to India’s productivity growth? World Bank Economic Review, 27(2), 202-228.

  • Harrison and Rodríguez-Clare, A. (2009). Trade, foreign investment, and industrial policy for developing countries. NBER Working Papers 15261, National Bureau of Economic Research, Inc.

  • Hasan, R., Mitra, D., Ranjan, P., & Ahsan, B. (2012). Trade liberalization and unemployment: Theory and evidence from India. Journal of Development Economics, 97, 269-280.

  • Hu, A., & Jefferson, G. H. (2002). FDI impact and spillover: Evidence from China’s electronic and textile industries. World Economy, 25(8), 1063-1076.

  • IMF. (1995). World economic outlook. Washington: International Monetary Fund.

  • Islam, N. (1995). Growth empirics: A panel data approach. Quarterly Journal of Economics, 110, 1127-1170.

  • Jefferson, G. H., & Ouyang, M. (2014). FDI spillovers in China: Why do the research findings differ so much? Journal of Chinese Economic and Business Studies, 12(1), 1-27.

  • Khandelwal, A., & Topalova, P. (2011). Trade liberalization and firm productivity: The case of India. The Review of Economics and Statistics, 93(3), 995-1009.

  • Kim, E. (2000). Trade liberalization and productivity growth in Korean manufacturing industries: Price protection, market power, and scale efficiency. Journal of Development Economics, 62, 55-83.

  • Krueger, A. O. (1978). Foreign trade regimes and economic development: Liberalization attempts and consequences. Working Paper, National Bureau of Economic Research, Cambridge Mass.

  • Krueger, A. O. (1981). Interactions between inflation and trade-regime objectives in stabilization programs. In W.R. Cline and S. Weintraub (Eds.), Economic Stabilization in Developing Countries (pp. 83-117).Washington, D.C.: Brookings Institute.

  • Krueger, A. O. (1983). Trade and Employment in Developing Countries: Synthesis and Conclusions. University of Chicago Press, Chicago, 3.

  • Kumari, D., & Malhotra, N. (2014, December). Trade-led growth in India and China: A comparative analysis. Journal of International and Global Economic Studies, 7(2), 68-88.

  • Lal, D., & Rajapathirana, S. (1987). Foreign trade regimes and economic growth in developing countries. World Bank Research Observer, 2(2), 189-217.

  • Lardy, N. R. (2003). Trade liberalization and its role in Chinese economic growth. Institute for International Economics, Washington, D.C.

  • Leamer, E. E. (1988). Measures of Openness. In R. E. Baldwin (ed.). Trade Policy Issues and Empirical Analysis, Chicago: University of Chicago Press for NBER.

  • Lin, P., Liu, Z. M., & Zhang, Y. F. (2009). Do Chinese domestic firms benefit from FDI inflow? Evidence of horizontal and vertical spillovers. China Economic Review, 20, 677-691.

  • Little, I. (1970). Industry and trade in some developing countries: A comparative study. Oxford University Press, London.

  • Lucas, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3-42.

  • Majumdar, J. (2001). Imported machinery and growth in LDCs. Journal of Development Economics, 65, 209-224.

  • Melitz Marc, J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 2003, 71(6), 1695-1725.

  • Michaely, M. (1977). Exports and growth: An empirical investigation. Journal of Development Economics, 4(1), 49-53.

  • Michaely, M. (1991). Liberalizing foreign trade: Lessons of experience in the developing world (41-59). Oxford: Basil Blackwell Ltd.

  • Michalopoulos, C. (2001). Trade Policy Reform and Poverty Alleviation. Development Research Group, International Team, the World Bank.

  • Muqtada, M., & Basu, P. (1997). Macroeconomic policies, growth and employment expansion: The experience of south. In A. R. Khan and Mustada (Eds.), Employment Expansion and Macroeconomic Stability under Increasing Globalization.

  • Mussa, M. (1986). The adjustment process and the timing of trade liberalization. In A. M. Choski and D. Papageorgiou (Eds.), Economic Liberalization in Developing Countries, Oxford and New York: Basil Blackwell.

  • Onafowora, O. A., & Owoye, O. (1998). Can trade liberalization stimulate economic growth in Africa? World Development, 26(3), 497-506.

  • Padoan, P., & Carlo, R. (1996). Trade and accumulation and diffusion of knowledge policy research. Working Paper No. 1679, The World Bank.

  • Parikh, A., & Shibata, M. (2004). Does trade liberalization accelerate convergence in per capita incomes in developing countries? Journal of Asian Economics, 15, 33-48.

  • Pigato, M. (1997). South Asia’s integration into the world economy. The World Bank, Washington, D.C.

  • Ram, R. (1985). Exports and economic growth: Some additional evidence. Economic Development and Cultural Change, 33(2), 415-425.

  • Ranakanduwa, W. (1999). Growth, employment and distributional effects of liberalization: A South Asian experience under globalization. Canadian Journal of Development Studies, 20, Special Issue.

  • Rivera-Batiz, L., & Romer, P. (1991). Economic integration and endogenous growth. Quarterly Journal of Economics, 106, 531-555.

  • Rodriguez, F., & Rodrik, D. (2001). Trade policy and economic growth: A Skeptic’s Guide to the cross-national evidence. In B. S. Bernanke and K. Rogoff (Eds.), NBER Macroeconomics Annual 2000.

  • Romer, P. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5), 71-102.

  • Rutherford, T., & Tarr, D. G. (1998). Trade liberalization and endogenous growth in a small open economy: A quantitative assessment. Policy Research Working Paper. Retrieved from http://documents.worldbank.org/curated/en/943571468739141914/Trade-liberalization-and-endogenous-growth-in-a-small-open-economy-a-quantitative-assessment

  • Sachs, J. D. (1987). Trade and exchange rate policies in growth-oriented adjustment programs. In V. Corbo, M. Goldstein and M. Khan (Eds.), Growth-Oriented Adjustment Programs, Washington, D.C.: IMF and World Bank.

  • Sachs, J., & Warner, A. (1995). Economic reform and the process of global integration. Brookings Papers on Economic Activity, 1, 1-117.

  • Sahoo, P. (2013). The growing dominance of China in South Asia: An Indian perspective. The International Trade Journal, 27(2), 111-141.

  • Santos-Paulio, A. (2002). The effects of trade liberalization on imports in selected developing countries. World Development, 30(6), 959-974.

  • Selvarajah, C., Meyer, D., & Bose, T. K. (2018). Organizational leadership in Bangladesh: An investigation of managerial response to a change environment. Contemporary Management Research, 14(1), 21-51.

  • Sharma, C. (2014). Imported intermediate inputs, R&D, and productivity at firm level: Evidence from Indian manufacturing industries. The International Trade Journal, 28(3), 246-263.

  • Shujaat, A. (2014). Trade liberalization and its economic impact on developing and least developed countries. Journal of International Trade Law and Policy, 13(3), 1-11.

  • Singhani, M., & Gupta, A. (2011). Determinants of foreign direct investment in India. Journal of International Trade Law and Policy, 10(1), 64-82.

  • Srinivasan, T. N. (2001). Trade, Development and Growth. Essays in International Economics, no. 225, December, International Economics Section, Princeton University.

  • Thomas, V., & Nash (1991). Reform of trade policy: Recent evidence from theory and practice. World Bank Research Observer, 6(2), 219-240.

  • Thomas, V., & Nash, D. (1992). Best practice in trade policy reform. Oxford: Oxford University Press for the World Bank.

  • Uddin, M. R., Bose, T. K., & Yousuf, S. (2014a). Entrepreneurial orientation (EO) and performance of business in Khulna city, Bangladesh. Journal of Small Business and Entrepreneurship, 27(4), 343-352.

  • Wacziarg, R. (1998). Measuring the dynamic gains from trade. Working Paper, May, World Bank.

  • World Bank. (1987). World development report 1987. New York: Oxford University Press.

  • World Bank. (1995). World development report 1995: Workers in an integrating world. Oxford University Press: New York.

  • Yadav, N. (2014). Impact of trade facilitation on parts and components trade. The International Trade Journal, 28(4), 287-310.

  • Yadav, P. (2012). India’s changing trade pattern in the process of globalization. Procedia: Social and Behavioral Sciences, 37(2012), 157-166.

  • Yanikkaya, H. (2002). Trade openness and economic growth: A cross-country empirical investigation. Journal of Development Economics, 72, 57-89.

  • Yin, F., & Hamori, S. (2012). Economic openness and growth in China and India: A comparative study. Journal of Reviews on Global Economic, 1, 139-149.

  • Yu, M. L. (2014). Processing trade, tariff reductions, and firm productivity: Evidence from Chinese products. Economic Journal, 125(June), 943-988.

  • Zhang, X., & Zou, H. (1995). Foreign technology imports and economic growth in developing countries. Policy Research Working Paper, no. 1412, The World Bank


Abstract Views: 176

PDF Views: 0




  • Rapid and Phased Trade Liberalisation Pathways to Economic Growth: Evidence from China and India

Abstract Views: 176  |  PDF Views: 0

Authors

Tarun Kanti Bose
Professor, Business Administration Discipline, Khulna University, Khulna, Bangladesh
Jannatul Ferdous Bristy
Assistant Professor, Human Resource Management Discipline, Khulna University, Khulna, Bangladesh and Doctoral Researcher, Adam Smith Business School, University of Glasgow, United Kingdom

Abstract


This paper investigates the hypothesis that there is an association between increased levels of trade liberalisation and economic growth through a comparative analysis of two giant emerging economies of the world – India and China. For this purpose the paper examines trends in GDP growth and various trade openness measures via empirical analysis of time-series data of the last 43 years, based on eight key indicators to compare the experiences of the two countries. These indicate that rapid and gradual trade liberalisation of both the countries, coupled with supporting economic, institutional, and infrastructural reforms, and advancement in technology led to the linking of these giants with the global markets, which has significantly contributed towards their economic growth, thereby supporting the phenomena that there is a significant positive relationship between liberalisation and economic growth. While China was seen to be experiencing growth, India was also on the right track. Indicators of both liberalisation and growth reveal that both the countries enhanced their economy significantly as they embraced international trade through trade reforms and economic liberalisation.

Keywords


Trade Liberalisation, Economic Growth, India, China

References