Quantitive Analysis for the Impact of China-India FTA

on China and the World Economy

Li Li    Shao Bingjia  Chen Xun

College of Economics and Business Administration, Chongqing University, Chongqing 400030, China

Abstract: Applying GTAP model and combining Walmsley’s dynamic recursion, the paper does a computable general equilibrium analysis on the impact of China-India FTA and other regional cooperation scenarios based on it in East Asia on China and the world economy from aspects of trade scale, trade structure, social welfare, GDP, and output levels. The results indicate that, China’s profit or loss is discrepant in different scenarios. Regional economic cooperation greatly improves China's national welfare and influences its GDP growth correspondingly. Services are China’s inferior industries and will suffer certain negative impact. The “10+6” scenario is the worst regional cooperation scenario for China, while China-India FTA and China-India-Australia FTA is beneficial for China. China should try to establish a FTA with India or with both India and Australia, and at the same time avoid the entry of Japan and ASEAN.

Key words: China-India FTA; GTAP Model; Dynamic Recursion; General Equilibrium; Economic Impact.