The dynamic relationship between processing trade and economic growth in China

This paper, based on the annual data from 1985 to 2007, builds up multi-variables´ VAR model among domestic product gross (GDP), processing trade export and processing trade import, and then analyzes the relative variance contribution of each structural impact to GDP by impulse response function(IRF) and variance decomposition. Studies have shown that for a short period, the alteration of China´s GDP is mostly affected by its own alteration, the influence of processing trade export and processing trade import on China´s GDP is low; for a long period, the contribution rate of processing trade export to GDP gradually increases while the influence coming from processing trade import is relatively weak.