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Impact of the Global Financial Crisis on China: Empirical Evidence and Policy Implications

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  • Ligang Liu
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    Abstract

    This paper applies a structural vector autoregression analysis to quantify the impact of the global financial crisis on China. It is found that the impact is indeed sizeable: a 1-percent decline in economic growth in the USA, the EU and Japan is likely to lead to a 0.73-percent decline in growth in China. The article discusses whether the current measures of fiscal stimulus are adequate to offset the sharp decline in external demand. Although there is little doubt that the massive fiscal stimulus will largely offset the significant shortfalls in external demand, the current growth pattern in China will be increasingly unsustainable in the long term. China's reform cycles suggest that external shocks are often opportunities for structural reforms. Therefore, the crisis could also be a catalyst for rebalancing China's economic structure so as to return the economy to a sustainable path. Copyright (c) 2009 The Author Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

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    Bibliographic Info

    Article provided by Institute of World Economics and Politics, Chinese Academy of Social Sciences in its journal China & World Economy.

    Volume (Year): 17 (2009)
    Issue (Month): 6 ()
    Pages: 1-23

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    Handle: RePEc:bla:chinae:v:17:y:2009:i:6:p:1-23

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    Cited by:
    1. Matthews, Kent & Zhang, Nina (Xu), 2010. "Bank productivity in China 1997-2007: Measurement and convergence," China Economic Review, Elsevier, vol. 21(4), pages 617-628, December.
    2. Diao, Xinshen & Zhang, Yumei & Chen, Kevin Z., 2012. "The global recession and China's stimulus package: A general equilibrium assessment of country level impacts," China Economic Review, Elsevier, vol. 23(1), pages 1-17.
    3. Yingxin Shi & Mototsugu Fukushige, 2013. "Long-Run Fiscal Multiplier for Autonomous Prefectures in China," Discussion Papers in Economics and Business 13-10, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    4. Fran├žoise Lemoine, 2010. "Past Successes and New Challenges: China's Foreign Trade at a Turning Point," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(3), pages 1-23.

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