Tourism Foreign Exchange Income and Economic Growth in China: A Panel Cointegration Approach

The purpose of this paper is to examine the empirical relationship between tourism foreign exchange income and economic growth based on Chinese Province-level data. We build a sample which comprises annual observations in 30 Chinese Provinces over the period 1995 to 2007. With this sample the number of time series observation is relatively large and of the same order of magnitude as the number of groups. This allows for the exploitation of new cointegration dynamic panel data techniques. The results revealed that the long-run equilibrium relationship between tourism foreign exchange income and economic growth is positive in nature. Research findings showed tourism foreign exchange income is significantly related to effect on economic growth although the ratio of tourism foreign exchange income to economic growth is lower in some provinces. The results also showed a lack of balanced development leads to a weak relationship between tourism foreign exchange income and economic growth although the ratio is higher both in some developed and underdeveloped provinces. These results further extended support for the local government's policies, which have been formulated to promote the tourism development.