The effect of Chinese Bilateral Trade on Economic Growth A Panel Study for Gulf Cooperation Council

Trade promotes economic growth through comparative advantage, specialization, access to foreign markets, economies of scale, resource allocation, technological progress, knowledge diffusion, and competition. This study is carried out to examine the effect of Chinese Bilateral trade on economic growth in Gulf Cooperation Council (GCC) thus; exports and imports of GCC with China are considered as explanatory variables of economic growth in GCC. Foreign direct investment (FDI) in taken as a control variable. This study analyzes panel data and unit root tests, cointegration test and cointegration regression are applied. Results indicate that variables are cointegrated in long run and exports and imports are determinants of economic growth in GCC. The long run estimates show that exports and imports are positive and significant factors of economic growth but the imports positively affect economic growth more than exports in GCC. The bilateral trade between China and GCC is beneficial for economic growth in GCC thus; GCC must strengthen political and economic ties with China for the development of the region.