An Empirical Analysis of RCEP on Trade Flow of Chinese Economics

Abstract

Regional Comprehensive Economic Partnership (RCEP) is a new free trade agreement dominated by ASEAN in 2011, and planned to end the negotiations in 2016. The goal of RCEP is to increase the degree of liberalization within the region, and eventually achieving zero tariffs on most commodities, thus to promote regional trade and economic development of each RCEP members. This study aims to empirical analyzes RCEP on trade flow of Chinese economic effects focus on FTA of china and other 15 RCEP member states through the panel gravity model with DID method. Annual panel data of China and other 15 RCEP members for a period of 1995-2015 were used in this study. According to the results of empirical analysis, firstly, the result shows trade between RCEP members and China is proportional to real GDP and distance that similar to the premise of basic gravity equation. Secondly, this study adds exchange rate variable to control the specific characteristics, which has a negatively significant effect on Chinese trade. The determine coefficient of exchange rate is 3.431, it reflects the ratio of export is higher than import in the total trade volumes, and the exchange rate is sensitive to the trade effects. Thirdly, as a result of the DID estimator, the coefficient of trade effects is 0.194 at the 1% significant level. Therefore, RCEP has a positive effect on trade flow of Chinese economics by using DID method.