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Are Chinese Trade Flows Different?

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  • Yin-Wong Cheung
  • Menzie D. Chinn
  • XingWang Qian

Abstract

We find that Chinese trade flows respond to economic activity and relative prices – as represented by a trade weighted exchange rate – but the relationships are not always precisely or robustly estimated. Chinese exports are generally well-behaved, rising with foreign GDP and decreasing as the Chinese renminbi (RMB) appreciates. However, the estimated income elasticity is sensitive to the treatment of time trends. Estimates of aggregate imports are more problematic. In many cases, Chinese aggregate imports actually rise in response to a RMB depreciation and decline with Chinese GDP. This is true even after accounting for the fact a substantial share of imports are subsequently incorporated into Chinese exports. We find that some of these counter-intuitive results are mitigated when we disaggregate the trade flows by customs type, commodity type, and the type of firm undertaking the transactions. However, for imports, we only obtain more reasonable estimates of elasticities when we allow for different import intensities for different components of aggregate demand (specifically, consumption versus investment), or when we include a relative productivity variable.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17875.

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Date of creation: Mar 2012
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Publication status: published as Cheung, Yin-Wong & Chinn, Menzie D. & Qian, XingWang, 2012. "Are Chinese trade flows different?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2127-2146.
Handle: RePEc:nbr:nberwo:17875

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Citations

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Cited by:
  1. Cheung, Yin-Wong & Chinn, Menzie D. & Qian, XingWang, 2012. "Are Chinese trade flows different?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2127-2146.
  2. Ashvin Ahuja & Nigel Andrew Chalk & Nathan Porter & Papa N'Diaye & Malhar Nabar, 2012. "An End to China’s Imbalances?," IMF Working Papers 12/100, International Monetary Fund.
  3. Heericourt, Jerome & Poncet, Sandra, 2013. "Exchange rate volatility, financial constraints, and trade : empirical evidence from Chinese firms," Policy Research Working Paper Series 6638, The World Bank.
  4. Byron S. Gangnes & Alyson C. Ma & Ari Van Assche, 2014. "Global Value Chains and Trade Elasticities," Working Papers 2014-2, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
  5. Gozgor, Giray, 2014. "Determinants of domestic credit levels in emerging markets: The role of external factors," Emerging Markets Review, Elsevier, vol. 18(C), pages 1-18.
  6. Feldkircher, Martin & Korhonen, Iikka, 2012. "The rise of China and its implications for emerging markets - Evidence from a GVAR model," BOFIT Discussion Papers 20/2012, Bank of Finland, Institute for Economies in Transition.
  7. Ertan Oktay & Giray Gozgor, 2013. "Estimation of disaggregated import demand functions for Turkey," Economics Bulletin, AccessEcon, vol. 33(1), pages 575-585.
  8. Branimir Jovanovic, 2013. "Aggregation Bias in Trade Elasticities: The Case of Macedonia," FIW Working Paper series 106, FIW.
  9. Willem THORBECKE, 2012. "Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters," Discussion papers 12003, Research Institute of Economy, Trade and Industry (RIETI).
  10. Aizenman, Joshua & Dekle, Robert & Lothian, James R., 2012. "Overview of the special issue on “Policy Implications of and Lessons from the Global Financial Crisis”," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 1971-1975.

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