The determinants of transformation and upgrading of China processing trade

Processing trade is an important way for China to participate in the international division of labor. Under the rising world financial crisis, the Chinese processing trade meets opportunities and challenges for transformation and upgrading. This paper does the empirical research on the factors affecting the transformation and upgrading of processing trade in China by using the multi-linear regression model and the relative data from 2003 to 2007. Through the empirical study we find that the major influencing factors of China processing trade structure are science and technology level, education level, RMB exchange rate and FDI. The science and technology level showed a positive correlation with the processing trade appreciation rate, whereas RMB exchange rate and FDI showed a negative correlation with it.