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The Shifting Structure of China's Trade and Production

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  • Li Cui
  • Murtaza H. Syed
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    Abstract

    This paper uses disaggregated trade data to assess how the expansion of China's production capacity and its changing production structure may be affecting its trade linkages with other countries. It finds that China is moving away from traditional assembly operations in its processing activities and its exports have started to rely more on domestically sourced components. In turn, China's imports and exports have begun to delink, with increased domestic sourcing contributing to the recent increase in its trade balance. In addition, as China moves up the value chain, both its imports and exports have become more sophisticated than in the past. As a result of these shifts, China may be becoming more exposed to fluctuations in the strength of the global economy, and changes in its exchange rate could have a bigger impact on the trade balance and the domestic economy than commonly believed.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/214.

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    Length: 29
    Date of creation: 01 Sep 2007
    Date of revision:
    Handle: RePEc:imf:imfwpa:07/214

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    Related research

    Keywords: Production; Exchange rates; Exchange rate instability; Industrial structure;

    This paper has been announced in the following NEP Reports:

    References

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    1. Dani Rodrik, 2006. "What's So Special about China's Exports?," NBER Working Papers 11947, National Bureau of Economic Research, Inc.
    2. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
    3. Peter K. Schott, 2008. "The relative sophistication of Chinese exports," Economic Policy, CEPR & CES & MSH, vol. 23, pages 5-49, 01.
    4. Hiratsuka, Daisuke, 2005. "The "Catching up" Process of Manufacturing in East Asia," IDE Discussion Papers 22, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    5. Peter K. Schott, 2004. "Across-product Versus Within-product Specialization in International Trade," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 646-677, May.
    6. Françoise Lemoine & Deniz Ünal-Kesenci, 2002. "China in the International Segmentation of Production Processes," Working Papers 2002-02, CEPII research center.
    7. Dani Rodrik, 2006. "What’s So Special about China’s Exports?," Working Papers id:410, eSocialSciences.
    8. Cerra, Valerie & Saxena, Sweta Chaman, 2003. "How responsive is Chinese export supply to market signals?," China Economic Review, Elsevier, vol. 14(3), pages 350-370.
    9. Coudert, Virginie & Couharde, Cecile, 2007. "Real equilibrium exchange rate in China is the renminbi undervalued?," Journal of Asian Economics, Elsevier, vol. 18(4), pages 568-594, August.
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    Cited by:
    1. Çigdem Akin & M. Ayhan Kose, 2007. "Changing Nature of North-South Linkages: Stylized Facts and Explanations," IMF Working Papers 07/280, International Monetary Fund.
    2. Françoise Nicolas, 2008. "The political economy of regional integration in East Asia," Economic Change and Restructuring, Springer, vol. 41(4), pages 345-367, December.
    3. Ibarra, Carlos A., 2011. "Import elasticities and the external constraint in Mexico," Economic Systems, Elsevier, vol. 35(3), pages 363-377, September.

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