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China's international trade after accession into the WTO. To explain the term of BDI, firstly some information about the shipping market should be introduced. Actually, shipping is a derived demand of international trade. Therefore, it is subject to the national economic development impact. Specifically, it is not only affected by the economic cycle, but also a country’s political and natural condition changing could bring impact to the shipping market. Thus we can see that shipping market is a great fluctuant market. Especially in recent years along with China’s economic development, under the large demand of bulk cargo and foreign trade, the “China factor” promotes the rising demand of international seaborne shipping. In 2004, the BDI, which reflects the freight, reached a new historical high point, as well as the shipping risk is enlarged. However, the derivative market is still a stranger for China, thus it is necessary for this paper to add it to the gravity model to estimate its influence to China’s international trade since the result can be draw on to avoid shipping risk and obtain shipping market information, which can benefits China’s international trade to some extent.

The BDI is a composite weighted index of the BCI, BPI and BHMI indices, which the BCI is short for Baltic’s Capesize Index, BPI is the Baltic’s Panamax Index and BHMI is the Baltic’s Handymax Index and each index accounts for one third of the BDI weight. The three indices reflect freight price of different levels of dry bulk cargo ships. With different ship category, the carrying capacity and freight of ship varies.

In my view, the BDI is an important index to study the future performance and investment value of shipping stocks, as well as one of the leading indicators of international trade. It epitomizes the global demand for minerals, grain, coal, cement and other primary commodities. Since China's iron ore imports accounted for about half of the world's iron ore imports, affected by the uncertainty of Chinese iron ore price negotiations and the U.S. Stocks plunged over the same period in January 2008, the BDI index plummeted which fell to 5,000 points. Thus, the BDI really can be regarded as a factor to estimate China's bilateral trade with other countries. Besides, BDI is calculated with the spot freight weighted by three main ship types, thus, the freight price level would be expected to affect the fluctuations of the index. If the freight price keeps high, it could be expected to provide an evidence of the prosperity of shipping market, in other word it can also reflect the development of the international trade. BDI is published daily by the Baltic Exchange in London, which is not only an important basis for price trend of China Ocean Shipping Company's dry bulk shipping stock, but also an indicator refers to the non-ferrous metals, coal and other primary manufactured commodities' stock price movements. The BDI's predecessor BFI began to be published in 1985 and the BDI index replaced the BFI as the most authoritative barometer of the dry bulk shipping market in the worldwide since in 1999. In this paper, the BDI will be added in the gravity model as a new variable to estimate whether it has any relationship with the bilateral trade between China and its trade partners.

2. Literature Review ===

Since Rose (2004) gets an unprecedented finding in his paper Do we really know that the WTO increase