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An analysis of China’s economic growth : the effects of the WTO and the RCEP

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September 2022



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Using econometric models based on the expenditure approach for Gross Domestic Product (GDP) measurement, our research examines the main factors that significantly contributed to China’s economic growth from 1978 to 2020. Our study investigates the impact of accession to the World Trade Organization (WTO)on China’s economy through a comparison of the pre-WTO period (1978-2001) and the post-WTO period (2002-2020).The regression results demonstrate that government consumption, total investment, and total exports contributed more to China’s GDP growth after China entered the WTO. The estimated coefficients for total exports were four to five times larger in the post-WTO period. Our research provides evidence that the WTO accession positively affected China’s economic development and strengthened the effect of exports on GDP growth in China. We find that marginal investment return did not decrease when capital investment increased during the post-WTO period. In addition, we examine the WTO’s effects on China’s economy during the five-year periods before and after joining the WTO. The results show that the WTO helped China stabilize its economy and contributed 2.01-2.37% to China’s average annual GDP growth in the five years after WTO entry. Based on our findings for the WTO, we predict that the Regional Comprehensive Economic Partnership (RCEP) could potentially increase China’s annual GDP growth by 0.62-0.73%. Finally, we discuss our research’s policy implications for China regarding consumption, capital investment, exports and imports, foreign direct investment (FDI), and research and development (R&D).

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