On the Relationship Between Openness and Growth in China: Evidence from Provincial Time Series Data

The effect of increasing openness on real output growth in China is examined. The framework of analysis is a regression model that uses time‐series data for each province. For east coastal provinces, increasing openness is found to have positive effects on real output growth, and some of the effects are statistically significant. The results appear to be broadly consistent with the new growth theories that openness enhances long‐run growth through its impact on technological improvement. However, inland provinces in China have been isolated from world trade for several decades and their economies devastated. An increased openness in these provinces is found to have, in most cases, negative effects on real output growth.