When China Sneezes, Asia Catches a Cold: the Effects of China’s Export Decline in the Realm of the Global Economic Crisis
AbstractIn this discussion report, we dispel the widely held misconception that China’s economy is excessively export-dependent and therefore particularly vulnerable to a drop in export demand. In the past two decades, China’s dramatic exports rise has largely been driven by the fact that many foreign firms have offshored a slice of their value chain – labor-intensive final assembly – to China for export purposes. Many of these assembly plants heavily rely on imported inputs from East Asian economies to produce their export products. Because of this feature, China passes on a large portion of its negative export demand shocks to the East Asian economies by reducing demand for their imported inputs. Using recent trade data, we provide evidence of this business cycle pass-through during the current economic crisis.
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Bibliographic InfoPaper provided by CIRANO in its series CIRANO For discussion... with number 2009dt-01.
Date of creation: 01 Jun 2009
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
- NEP-SEA-2009-07-03 (South East Asia)
- NEP-TRA-2009-07-03 (Transition Economics)
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- Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
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