We analyze the impact of China's growth on the exports of other Asian countries. Our innovation is to distinguish the increase in China's demand for imports from its increased penetration of export markets. Using the gravity model, we disaggregate among commodity types and account for the endogeneity of Chinese exports. We confirm the tendency for China's exports to crowd out the exports of other Asian countries. But this effect is felt mainly in markets for consumer goods and hence by less-developed Asian countries, not in markets for capital goods or by the more advanced Asian economies for which machinery and equipment are a significant fraction of exports. At the same time, there has been a strong tendency for a rapidly growing China to suck in imports from its Asian neighbors. But this effect is mainly felt in markets for capital goods, where China's income elasticity of import demand is highest, and thus by the more advanced Asian economies. Hence, more and less developed Asian countries are being affected very differently by China's rise.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10768.
Length: Date of creation: Sep 2004 Date of revision: Handle: RePEc:nbr:nberwo:10768
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Find related papers by JEL classification: E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
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