Economic globalization, trade gap and the role of China

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1 E3 Journal of Busness Management and Economcs Vol. 3(5). pp , May, 2012 Avalable onlne ISS E3 Journals 2012 Full length research paper Economc globalzaton, trade gap and the role of Chna Hao We 1 *, Wang 2 and Chunmng Zhao 3 1 Internatonal Trade Department, Bejng ormal Unversty 2 School of Internatonal Busness, Bejng Language Culture Unversty 3 School of Economcs and Busness, Bejng ormal Unversty Accepted 20 Aprl, 2012 Ths paper analyzes the foregn trade gap between 36 countres and regons and the role Chna plays from 1978 to The paper fnds that the absolute gap among those countres ncrease, but the relatve gap decrease, the gap between the developng and the developed decrease, the nter-regonal gap of the developed s bgger than the developng. The rsk of foregn trade gap between the countres decreases. Chna has played a sgnfcant role n the expanson of foregn trade gaps between countres and regons. So t s necessary for Chna to change the model of foregn trade. Keywords: Economc globalzaton; Foregn trade gap; Countres and Regons; Chna Introducton Dfferent countres have dfferent atttudes towards economc globalzaton. Some countres are partcpatng n economc globalzaton and some other countres are aganst economc globalzaton. There are a lot of researchers are argung about the effect of economc globalzaton on economcs, socety, envronment and so on. One of the key questons s the effect of economc globalzaton on the ncome gap between countres. There have a lot of valuable research fndngs on gap of economc development and gap of ncome between countres, but there s a lack of research on foregn trade gap. Internatonal trade s crucal to economc globalzaton and t s also the engne of economc development. Most countres n the world partcpate n nternatonal trade by the means of jonng trade system, regonal cooperaton and reform of economy system. Consderng of nternatonal background, t s of mportance to deeply analyze the gaps of foregn trade between countres. Ths queston s meanngful to the theory and practce.well, s the foregn trade gap ncreasng or decreasng? How dd the gap develop? Is the change of foregn trade gap between developed countres and that between developng countres dfferent? What s the trend of gap of nteror and exteror *Correspondng Author E-mal: wehao2007@gmal.com; countres n dfferent regons? What s more, what s the effect of Chna s foregn trade to other countres foregn trade? Wll t ncrease or decrease nter-regonal gaps? Ths paper wll focus on these questons. Ths paper wll do research on foregn trade gap n 36 countres and regons wth the data from and some methods n dfferent subject. Research methods and data source Overall gap ndex: S ndex and V ndex (1)Absolute gap ndex (S ndex) standard devaton: (2)Relatve gap ndex (V ndex) ndex of S V = = varablty: 2 ( ) / = 1 and (2), S s standard devaton. V s ndex of varablty. s foregn trade volume of In equaton (1) country. Isaverage foregn trade volume of all the = 1 = countres n a year, and ts equaton s. s the number of countres. The bgger standard devaton n

2 Hao. 163 and ndex of varablty s, the larger regonal gaps of foregn trade are. Gaps decomposton ndex: I ndex Ths paper use Hll ndex to analyze regonal gaps of foregn trade. Accordng to Hll ndex s prme formula, decomposton formula and ts ntenson, consderng the research objectves of ths paper, ths paper uses the number of countres to replace the demographc varable and uses gross foregn trade value to replace ncome varable n the decomposton formula. And the Hll ndex turns nto (H.Thel,1967;Houka 1 I = log = 1 We,1996) number of countres. In ths equaton, s the s the foregn trade volume of country n a year. s the average foregn trade volume of all the countres.if the countres n the world are dvded nto G parts, then the decomposton formula s ( / ) I = + log ( / ) G G g g g I g g= 1 g = 1 g In ths equaton, g stands for group g I g. stands for the nteror gaps n group g g. stands for the number of countres n group g g. stands for the foregn trade volume of countres n group g. stands for the foregn trade volume of all the countres (Schwarze,1996;Ca and Du, 2000). The frst part of ths equaton stands for nteror foregn trade gap n a regon, and the second part of ths equaton stands for the nter-regon foregn trade gap. Development level gap ndex: ndex Accordng to the meanng of economc locaton entropy ndex, ths paper constructs foregn trade locaton entropy ndex and the formula s: / = G D P / = 1 = 1 G D P In ths equaton, stands for locaton entropy ndex, stand for the foregn trade volume of country n a year, GDP stands for the GDP of country, stands for the number of countres. The upper part of the formula stands for proporton of country s foregn trade amountng n the total foregn trade volume. The lower parts of the formula stands for proporton of country s GDP amountng n the total GDP of all the countres, stands for the rato of the upper part and lower part (Cu et al., 2005). The larger s, the more prosperous country s foregn trade s, and the smaller s, the less prosperous country s foregn trade = s. Ths paper supposes that ( / ) = 1 stands for the average foregn trade locaton entropy ndex of all the countres. If > > 1 t means that ths and, regon s foregn trade takes the lead n the countres. If < < 1, t means that ths regon s foregn trade s average. If < < 1, t means that ths regon s and foregn trade falls behnd the majorty. Accordng to ths standard, all the countres can be dvded nto several groups. Gaps rsk ndex: G ndex Consderng the research objectves, ths paper selects the followng computng method: G = ( + 1 ) 2 = 1 stands for Gn coeffcent, stands for the number of countres, stands for the foregn trade of country, stands for average foregn trade volume and t s defned as followng: 1 = 1 =. ote that when we are usng ths formula to calculate, we should order the foregn trade volume from low to hgh, ensurng that the weght of country wth large foregn trade volume s small and the weght of country wth small foregn trade volume s large (Sen,1973;Fe and Rans,1974;Fe,Rans,Kuo,1979). G

3 164 E3. J. Bus. Manage. Econ. Data resource and research angle Ths paper collects the foregn trade data of all the countres durng from WTO statstcs database and UCTAD database. GDP of all the countres durng s collected from UCTAD database. Global trade conssts of goods trade and servce trade, but ths paper only analyzes goods trade, whch s predomnatng n global trade. Research angle Ths paper not only estmates the foregn trade gap n 36 countres, but also estmates the nteror and exteror foregn trade gap n Amercan countres, Asan countres, and European countres. Accordng to ther economy status, ths paper dvdes the 36 countres nto developed countres and developng countres by the World Bank s standard. After the dvson, ths paper estmates the nteror and exteror foregn trade gap and also measures the Chna s effect on the change of foregn trade gap between countres. Consderng hstorcal reasons, the data of Russa durng adopts the data of the Sovet Unon, the data of Czech durng adopts the data of Czechoslovaka, the data of Belgum and Luxembourg durng adopts jont statstcal data. What s more, consderng the research objectve of ths paper, the bass of selectng countres s as follows: frst of all, we select the top 30 countres accordng to the export and mport data collected from WTO database n Consderng the global trade of Saud Araba and Unted Arab Emrates s dependent on petrol export, the two countres are rejected and orway and Indonesa are added n the lst. Consderng the effect of European Unon, we added the other 6 countes n EU n the lst, and the 6 countres ncluded Denmark, Luxembourg, Greece, Ireland, Portugal and Fnland. The number of countres s 36. In 2007, the foregn trade volume of the 36 countres takes up 84.8% of the world s foregn trade volume, and then the 36 countres are representatve. Ths paper estmates the foregn trade gap of 36 countres. Consderng the foregn trade volume of Amercan countres (USA, Canada, Mexco and Brazl) takes up 17.35% of the world s foregn trade volume, the foregn trade volume of Asan countres (Chna, Hong Kong, Tawan, Japan, Republc of Korea, Sngapore, Inda, Malaysa, Thaland, and Indonesa) takes up 25.68% of the world s foregn trade volume, the foregn trade volume of European countres (Germany, France, Brtan, the etherlands, Italy, Belgum, Span, Russa, Swtzerland, Austra, Sweden, Poland, Turkey, the Czech republc, orway, Ireland, Denmark, Fnland, Portugal, Greece, Luxembourg) takes up 41.27% of the world s foregn trade volume, we estmate the nteror foregn trade gap and exteror foregn trade gap of the 3 contnents. Consderng the level of development, the 36 countres are dvded nto developed countres (The Unted States, Canada, Hong Kong, Chna, Tawan, Japan, Korea, Sngapore, Germany, France, Brtan, the etherlands, Italy, Belgum, Span, Swtzerland, Austra, Sweden, the Czech Republc, orway, Ireland, Denmark, Fnland, Portugal, Greece, Luxembourg, and Australa) and developng countres (Chna, Russa, Mexco, Brazl, Inda, Malaysa, Thaland, Indonesa, Poland and Turkey) accordng to the World Bank s standard. Ths paper estmates the nteror foregn trade gap and exteror foregn trade gap, and also analyzes Chna s effect. Ths paper manly analyzes the hstory, trend and reason of 36 countres foregn trade gap durng , and t also dscusses the role and effect of Chna. In the followng text, the number of 36 mples 36 countres we selected and the number of 35 mples other 35 countres except Chna. Analyss of foregn trade gaps between countres The absolute gap between countres wth S ndex On the whole, durng , the S ndex of the 36 countres foregn trade absolute gap was ncreasng, whch means the foregn trade absolute gap between these countres was ncreasng. In 1978, the foregn trade absolute gap between 36 countres was 73 bllon dollars, and n 2007 the gap was 672 bllon dollars. The absolute gap ncreased by 9.1 tmes n 30 years, and t means that the absolute gap between 36 countres was ncreasngly clear. Seeng from the rate of change, S ndex was ncreasng, but t ncreased faster after In , absolute gap was ncreasng slowly, and the average annual ncrease was 5 bllon dollars. In , the average annual ncrease was 16 bllon dollars. In , the absolute gap was ncreasng rapdly and the average annual ncrease was 45 bllon dollars. We can arrve at a concluson that the foregn trade absolute gap between countres wll ncrease more rapdly as economc globalzaton constantly moves nto depth. The ncrease of foregn trade gap was caused by many factors, for example, gap of hstory of reform and open polcy, gap of ndustral base and foregn trade base, gap of locaton advantage, and gap of atttude towards attendng economc globalzaton. In Fgure 1, there have two curves, one stands for absolute gap between 36 countres, and the other one stands for absolute gap between 35 countres wthout Chna. In Fgure 1, we can fnd that the two curves were almost the same durng , but after 2002, the curve of 36 countres s hgher than the curve of 35 countres, whch means that Chna s effect n ncreasng foregn trade gap was ncreasng. The man reason was that Chna jons the WTO, and Chna s foregn trade was ncreasng more rapdly than other countres.

4 Hao. 165 Fgure 1. S ndex of foregn trade gap Fgure 2. V ndex of foregn trade gap In 2002, Chna s foregn trade volume was 620 bllon dollars. In 2007, Chna s foregn trade volume was 2,173 bllon dollars, and the average annual growth rate of Chna s trade durng was 23.2% and that of other countres was 12%, whch was only half of the Chna s average annual growth rate.in Fgure 2, the trend of V ndex was contrary to that of S ndex. Durng , the V ndex was decreasng volatlty. In 1978, the V ndex was 1.183, and n 2007, the V ndex was 1.015, whch means the foregn trade relatve gap of 36 countres was decreasng. Durng , the foregn trade relatve gap can be dvded nto four stages: (1) Durng , the trend of V ndex showed U-curve, whch means the foregn trade relatve gap frst ncreased and then declned. (2) Durng , the V ndex was decreasng, whch means foregn trade relatve gap between countres was reducng. (3) Durng , the V ndex was ncreasng, whch means foregn trade

5 166 E3. J. Bus. Manage. Econ. relatve gap was ncreasng. (4) Durng , the V ndex was declnng, whch means the foregn trade relatve gap was reducng. In Fgure 2, the curve of 35 countres wthout Chna was below the curve of 36 countres durng , ths demonstrates that Chna was partcpatng n nternatonal dvson of labor actvely and Chna strove to develop nternatonal trade and expanded the foregn trade relatve gap between countres, whch means Chna played a negatve role n reducng the foregn trade relatve gap. Durng , the two curves were almost the same, and most countres were undergong revval and redevelop, the role of Chna was not obvous. Durng , the curve of 35 countres was below that of 36 countres, and Chna helped to reduce the foregn trade relatve gap, whch means Chna plays a postve role n reducng the foregn trade relatve gap between countres. After 2001, the two curves start convergng, t demonstrates that the role of Chna n reducng the foregn trade relatve gap was decreasng. It also demonstrates that other countres foregn trade was developng rapdly, and the foregn trade relatve gap between countres may start convergng. On the whole, from 1984, the development of Chna s foregn trade helped to reduce the foregn trade relatve gap between countres, and ts effect was hghlghtng. Chna s effect reached a maxmum n 2001 and ts effect was reducng after that. For example, the core trade partners of German were manly European countres, and the top fve countres of German were France, the Unted States, Brtan, Italy, and the etherlands. Industres complementary promote the coordnated development of European countres. (3) The nteror gap of foregn trade n Asan countres was the smallest. Durng , I ndex was almost decreasng as a whole. In 2000, I ndex was the smallest, and ts value was After 2000, t developed steadly and t was ncreasng slowly. In 2007, I ndex was Because I ndex was small and t was ncreasng slowly, the trend demonstrated that the Asan countres were developng balanced. In Fgure 3, the curve of 36 countres almost keeps the same gap wth the curve wthout Chna before The curve wthout Chna was hgher than the curve of 36 countres. The trend demonstrates that Chna helped reduce nteror gap of foregn trade among Asan countres before 2001, but the curve ncludng Chna was ncreasng and the curve wthout Chna was decreasng after Ths trend demonstrates that Chna expanded nteror gap of foregn trade among Asan countres after Ths was caused by the rapd development of Chna s foregn trade after partcpatng n WTO. Chna s ncreasng speed n foregn trade was faster than any other Asan countres. From 2002 to 2007, Chna s foregn trade has ncreased by 2.5 tmes and grown from 4% to 9% of the world total foregn trade. Analyss of Amerca foregn trade, Europe foregn trade, the relatve gap between countres wth V ndex trade and Asa foregn trade Interor gap of the three contnent s foregn trade wth I ndex On the whole, nteror gap of Amerca foregn trade was bggest, nteror gap of European foregn trade takes the second place, and nteror gap of Asan foregn trade was smallest. All the nteror gap of foregn trade was decreasng.in the vew of each contnent: (1)The nteror gap of foregn trade n Amercan countres was bggest, but the gap was decreasng. Durng , I ndex was between 0.25 and 0.3, and I ndex was decreasng except , whch means the nteror gap n Amercan countres were reducng. (2)The nteror gap of foregn trade n European countres was n the second, and the gap was decreasng n rpples. Durng , the gap was between and 0.175, ths stuaton was caused by several factors, for example, European ntegraton whch helped to remove trade barrers and promote trade exchange, what s more, the synergy among countres also helped to reduce trade development gap. Germany, France, the etherlands, Belgum, Italy, Brtan were trade partners, and there was ntra ndustry trade among these countres. Exteror gap of the three contnents foregn trade wth I ndex I ndex of foregn trade gap n 3 contnents was declnng. In 1978, I ndex was 0.243,n 1996, I ndex falls to and t was n We can fnd that foregn trade gap n Amercan, European and Asan regons were declnng. The gap ncluded nteror gap whch means the gap between countres and exteror gap whch means gap between contnents. In Fgure 4, we can reach a concluson: (1) the nteror gap of the three contnents was predomnant, and the nteror gap was reducng slowly. From 1978 to 1997, I ndex changes from to 0.158, and t was n From proporton perspectve, the proporton that nteror gap n total gap was more than 85% snce 1978, and t was 91% snce The nteror gap manly caused by the nteror gap of Amercan and European regons. (2) The exteror gap of the three contnents was declnng. I ndex of exteror gap changed from to durng In 2000, I ndex was 0.028, but t decreased after that and t was n From proporton perspectve, the proporton was less than 15% snce We can fnd that the total gap of Amercan, European and Asan foregn trade manly appeared as nteror gap whch was about 90%, and the exteror gap was not obvo us.

6 Hao. 167 Fgure 3. I ndex of Amercan, European and Asan countres Fgure 4. ndex of foregn trade gap of Amercan, European and Asan countres From 1978 to 2007, the total gap of Amercan, European and Asan foregn trade was decreasng steadly as a whole. The foregn trade gap of developed countres and developng countres wth I ndex The foregn trade nteror gap wth I ndex On the whole, nteror gap of developed countres was greater than that of developng countres. From a regonal perspectve, we can reach a concluson that: (1) the foregn trade nteror gap of 26 developed countres was great, but the gap developed steadly. (2) The foregn trade nteror gap of 10 developng countres was fluctuatng greatly. Durng , I ndex was fluctuatng. Durng , I ndex changed from to Durng , I ndex was steady. I ndex was ncreasng after 2001, and t was n 2007 (See Fgure 5). The role of Chna changed greatly n the gap of 10 developng countres. Durng , the curve wthout Chna was above the curve ncludng

7 168 E3. J. Bus. Manage. Econ. Fgure 5. I ndex of the developed countres and the developng countres Chna, and ther trends were consstent. Durng , the curve wthout Chna was under the curve ncludng Chna, and ther trends were consstent before Durng , the curve ncludng Chna was ncreasng greatly, and the curve wthout Chna was decreasng obvously. We reach a concluson that Chna helped to reduce foregn trade gap of developng countres before 1991, and Chna contrbuted to ncrease foregn trade gap of developng countres after Ths stuaton was manly caused by the rapd development of Chna s foregn trade snce the early 1990, and after Chna partcpated n WTO, ts foregn trade developed even greater. Chna s foregn trade ranked 26 n 1980, and ranked 3 n Durng , Chna s exports accounted for proporton of world s export ncreased from less than 1% to 6%, and ts exports accounted for proporton of developng countres export ncreased from 3% to 20%. Ths stuaton contrbuted to the ncrease of foregn trade gap between Chna and other developng countres. The foregn trade gap wth I ndex On the whole, I ndex of foregn trade gap was slghtly but consstently declnng. In 1978, I ndex was 0.215, t fell to n In 2007, I ndex was We can reach a concluson that the foregn trade gap between developed countres and developng countres was convergng, and the gap was reducng. In Fgure 6, we can reach some conclusons about the foregn trade gap of developed countres and developng countres.(1) The nteror gap was predomnant n the total role. I ndex of the foregn trade nteror gap of two regons fell from to durng Durng , I ndex was fluctuatng between and 0.144, started to ascend snce 1999 and reached ts maxmum whch was n After 2002, t started to fluctuate steadly. In the proporton respect, the proporton ascended from 78.60% to 81.30% durng Snce 1986, t started to fell and reached to 65.70% n 1992, and then started to ascend to 96.80% n That s to say, the foregn trade gap of developed countres and developng countres were manly caused by the nteror gap of the two regons. (2) The exteror gap was playng a less mportant role n the total gap. In the numercal value vew, I ndex of exteror gap fell from to durng , and t started to ncrease slowly after that. In 1992, t was 0.07, but then t declned to n In the proporton vew, nteror gap fell from 21.40% to 17.50% durng , and then t ncreased to 34.30% n The proporton started to decrease snce 1992, and t was only 3.20% n In concluson, durng , the total gap of foregn trade of developed countres and developng countres were manly caused by the nteror gap of both regons. The nteror gap of developed countres was greater than that of developng countres. The gap between developed countres and developng countres

8 Hao. 169 Fgure 6. I ndex of foregn trade gap of the developed countres and the developng countres Fgure 7. G ndex of the foregn trade gap were declnng, but the nteror gap was ncreasng and exteror gap was declnng recently. The rsk of foregn trade gap wth G ndex In Fgure 7, G ndex of foregn trade gap was declnng on the whole, G ndex fell from to durng Ths demonstrates that the rsk of foregn trade gap was declnng, and ths concluson was consstent wth the preamble analyss whch sad that the relatve gap was declnng. Before 1980, the curve ncludng Chna and the curve wthout Chna were almost consstent, and ths was because Chna just started carry out reform and open polcy then. Durng , the curve wthout Chna

9 170 E3. J. Bus. Manage. Econ. Table 1. the ndex of foregn trade development of countres n the lead durng Seral number Country 1978 Country 1987 Country 1997 Country Sngapore Sngapore Sngapore 7.35 Sngapore Hong Kong 5.11 Hong Kong 7.16 Hong Kong 6.23 Hong Kong Ireland 3.42 Belgum 3.86 Malaysa 4.31 Belgum Belgum 3.40 Luxembourg 3.86 Belgum 3.60 Malaysa Luxembourg Malaysa Luxembourg The Czech Republc 6 Tawan 3.31 Ireland 3.25 Ireland 3.07 The Dutch The Dutch 3.11 Tawan 3.10 The Dutch 2.82 Tawan Malaysa The Dutch The Czech Thaland Republc 9 South Korea 2.06 South Korea 2.27 Thaland 2.18 Luxembourg The Czech Tawan Republc 11 Swtzerland 1.96 Mean value Chna was above the curve ncludng Chna, and ths demonstrates that Chna took an actve part n nternatonal dvson of labor and strove to develop foregn trade, whch helped to reduce the rsk of foregn trade gap. But, after 2002, the foregn trade developed rapdly whch ncreased the rsk of foregn trade gap. In the Fgure 7, the curve wthout Chna was lower than the curve ncludng Chna snce 2003, and the gap between two curves were ascendng. The level of foregn trade development wth ndex We estmate the ndex of 36 countres durng 30 years. Accordng to the results, the countres wth hgh level of foregn trade were stable durng In most years, there were 9 countres whch were n the frst place, but there were 10 or 11 countres n the lead n several years. On the whole, the order and ndex of these countres were relatvely stable. In Table 1, we can fnd that: (1) Frstly, Sngapore and Hong Kong were always the top 2, because ther economc systems were hghly open and nternatonal. Malaysa, Tawan, Thaland, Belgum, Ireland, the etherlands, and the Czech Republc had developed foregn trade, but ther order may change wth economc fluctuaton. (2) Secondly, ndex was decreasng on the whole. For example, Sngapore s ndex contnued to fall durng the past 30 years, ndex of Sngapore s n 1978 and decrease to 7.54 n ndex of other countres followed the smlar trend. In the sght of balance, effect of dfferent countres foregn trade on boostng economy was balanced, whch s helpful to the coordnated development of world economy. The foregn trade level of Chna contnued to ascend. In 1978, ndex was only 0.37, but t was 1.38 n 2007, whch was almost four tmes as large as ndex n Compared wth the world s average foregn trade development, the development of Chna s foregn trade was below the world s average level, but the gap was reducng. We take seven countres nto consderaton: The Unted States, Japan and Germany, Russa, Brazl, Inda and Chna. In Fgure 8, the foregn trade level of seven countres ncludng Chna was below the world s average level durng In the seven countres, German s foregn trade development was the hghest. Chna contnued to ncrease convergng towards German. Russa had a large range of varatons. The foregn trade development of the Unted States, Japan, Inda and Brazl was low caused by dfferent reasons. Conclusons Ths paper researches on the foregn trade gap n 36 countres and Chna s effect on the gap. We fnd that: (1)On the whole, the absolute gap of foregn trade n countes was ncreasng, and Chna contrbuted to ncrease the foregn trade gap snce The relatve gap of foregn trade decrease n rpples and foregn trade development of Chna helped to reduce the foregn trade gap snce Chna s effect on the foregn trade gap was ncreasng and reached hghest n 2001, but ts effect started to reduce after that.(2) From the vew of foregn trade gap of Amerca, Europe and Asa, the foregn trade gap of the three contnents were declnng, and the gap was manly caused by nteror gap. The exteror gap was relatvely lttle. Interor gap accounted for about 90%

10 Hao. 171 Fgure 8. ndex of some countres and average of 36 countres durng proporton, and exteror gap accounted for about 10% proporton. From the vew of nteror gap, Amercan nteror gap was greatest, European nteror gap came next and Asan nteror gap was smallest.accordng to the research results, Chna contrbuted to reduce Asan nteror gap before 2001, but Chna contrbuted to ncrease nteror gap after (3) From the vew of foregn trade gap of developed countres and developng countres, the gap of two groups was decreasng, and the gap was manly caused by the nteror gap. Interor gap of developed countres was always greater than that of developng countres. Chna contrbuted to reduce the foregn trade gap of developng countres before 1991, but Chna contrbuted to ncrease the foregn trade gap after (4) The rsk of foregn trade gap was reducng. G ndex fell from to durng Durng , the development of Chna s foregn trade helped to reduce the rsk of foregn trade gap. Snce 2004, the development of Chna s foregn trade contrbuted to ncrease the rsk of foregn trade gap. (5) The countres whose foregn trade development takes the lead were stable. Development of Chna s foregn trade was ncreasng. ndex ncreased from 0.37 to 1.38 durng Compared wth the average level of world s foregn trade development, development of Chna s foregn trade was lower than that of world s foregn trade. But Chna s development was convergng wth world s average development and German s foregn trade development. In recent 30 years, the foregn trade gap n countres was reducng on the whole wth globalzaton of world economy. Ths result proved that economy globalzaton was n favor of reducng foregn trade gap. But we also found that reducng foregn trade nteror gap was vtal to reducng world s foregn trade gap. In the context of economc globalzaton, a country should carry out reform and open polcy, strve to develop foregn trade, partcpate n nternatonal dvson of labor, and all these actons are n favor of economc development and reducng the gap wth other countres. What s more, n order to reduce foregn trade nteror gap n a regon, regonal economc ntegraton should be further mproved. Accordng to the analyss of Chna s effect on regonal foregn trade gap n the world, we reach a concluson that Chna s effect on reducng foregn trade gap changed from postve to negatve snce Ths was caused by rapd development of Chna s foregn trade snce Chna partcpated n WTO. Ths result was also consstent wth envronment depravaton of Chna s foregn trade, ncreasng trade frctons, ncreasng rsks of foregn trade. In order to allevate challenges of Chna s foregn trade, Chna should speed up the ndustral structure promoton, optmze the foregn trade structure, mprove the qualty of usng foregn nvestment, strengthen economc and trade exchanges wth surroundng regons, and change the model of Chna's foregn trade growth. REFERECES Amt S (2010). Trade gap wth Asean grows, Barry B, Susan MC (2008). Tradng wth Asa s Gants,

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