China’s foreign trade, WTO accession and institutional quality

China’s trade volume has grown substantially during the last three decades. Simultaneously, its institutional quality has also improved at a slow yet stable pace. This subsequent improvement in China’s institutional quality can improve product quality and reduce trade costs. Consequently, these are seen to encourage bilateral trade. Moreover, its accession into the WTO requires China to implement some mandatory institutional reforms. Undoubtedly, as China fulfills its WTO commitments, it will raise the quality of its exports and foster trade with its trading partners. In this paper, I employ the augmented gravity trade theory to provide the validating foundation for my conclusion that there is strong evidence that institutional quality improvement fosters China’s foreign trade. In order to arrive at this conclusion, I use a rich panel data set and control for the endogeneity of the institutional quality. Moreover, this finding is also robust to alternative measures of institutional quality in China.