Chinese Economic Growth and a Few Theoretical Explanations

Abstract

As the world becomes increasingly globalized, many explanations have been offered for international trade. In recent years, China has emerged onto the global scene as a large player in the international trade market. From this market expansion, China’s wealth has grown tremendously, raising millions of its citizens from poverty and expanding its influence beyond its borders notwithstanding the negative forces of 2020 and corona episode. The growth of China since 1990 has been sharp and fast, leading to the unprecedented increase in per capita income of average Chinese. This paper summarizes three theoretical explanations for International trade, and applies them to China in an attempt to develop a comprehensive explanation for this rapid growth. Heckscher-Ohlin Theory of trade is tested, in addition to the gravity model and intra-industry trade theory. The paper then concludes by examining the relevance and identifying the limitations of these theories, including political and economic factors such as intellectual property theft and human rights violations. As China continues to rival the U.S. as the global hegemon, we think that a developed understanding of the drivers of Chinese growth is of utmost importance.