Trade liberalization, institutional quality, and social trust of Chinese residents

The process of trade liberalization is also a process of deepening and improving China’s institutions, which will certainly have a profound impact on social trust, but literature on how trade liberalization affects trust is scarce. This paper examines the impact of import trade liberalization on Chinese residents’ social trust using a fixed-order regression model based on the Chinese General Social Survey (CGSS) data from 2010 to 2017. The study finds that import trade liberalization significantly contributes to the enhancement of social trust among Chinese residents. The mechanism analysis confirms that import trade liberalization enhances the social trust of Chinese residents mainly through the channel of improving institutional quality. Heterogeneity analysis shows that different sensitivities to institutions of heterogeneous individuals lead to a more significant contribution of import trade liberalization to residents’ social trust levels in highly institutionalized regions, party and government organs, the military, non-agricultural households, and higher educated groups of residents. The findings of this paper imply that building an all-around opening pattern in the new era can contribute to the enhancement of mutual trust in Chinese society.