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China’s recent growth and its impact on the New Zealand economy

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  • Scott Bowman
  • Patrick Conway

    ()
    (The Treasury)

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    Abstract

    The People’s Republic of China has become increasingly important to the New Zealand economy since the start of economic liberalisation in China more than 30 years ago, particularly in the past decade. This paper is the first of three looking at the impact of China on the New Zealand economy. It examines China’s recent economic expansion and traces the channels through which this expansion and the subsequent increased demand for commodities have impacted on the New Zealand economy, concentrating on exports in the past decade. The second paper (Bowman & Conway, 2013) examines the outlook for China’s impact on the New Zealand economy through these same channels. The third paper (Osborn & Vehbi, 2013) quantifies the impact of China’s expansion and commodity demand on the New Zealand economy through the framework of an econometric model. This paper concludes that China’s expansion has had a large positive impact on the New Zealand economy, mainly through increased merchandise exports, but also through services exports, merchandise imports and other channels. Merchandise exports to China were equivalent to 3.3% of New Zealand’s nominal GDP in 2012, up from 0.8% in 2000. The trend increase in exports to China since 2000 has mainly been a result of higher volumes, with higher prices providing a boost to incomes. The increase in exports to China has generally not come at the expense of lower export volumes to other markets. Since 2001, dairy and forestry exports have outperformed the rest of the economy, contributing 7.9 percentage points to expenditure GDP growth, versus an expected contribution of only 1.9 percentage points if they grew at the same rate as the economy as a whole. Chinese demand has also been the main driver of increased dairy and forestry production recently and they have also outperformed the rest of the economy. Since 2008, the dairy and forestry industries have contributed 2.1 percentage points to real production GDP growth versus an expected contribution of 0.2 percentage points.

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    Bibliographic Info

    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 13/15.

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    Length: 35
    Date of creation: Jul 2013
    Date of revision:
    Handle: RePEc:nzt:nztwps:13/15

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    Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
    Phone: +64-4-472 2733
    Fax: +64-4-473 0982
    Web page: http://www.treasury.govt.nz
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    Related research

    Keywords: China; New Zealand; commodities; dairy; forestry; merchandise trade;

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    1. Chris Hunt, 2007. "Emerging Asia and global inflation," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 70, March.
    2. Michael Plumb & Christopher Kent & James Bishop, 2013. "Implications for the Australian Economy of Strong Growth in Asia," RBA Research Discussion Papers rdp2013-03, Reserve Bank of Australia.
    3. Eswar S. Prasad, 2009. "Rebalancing Growth in Asia," NBER Working Papers 15169, National Bureau of Economic Research, Inc.
    4. Emanuele Baldacci & Ding Ding & David Coady & Giovanni Callegari & Pietro Tommasino & Jaejoon Woo & Manmohan S. Kumar, 2010. "Public Expenditureson Social Programs and Household Consumption in China," IMF Working Papers 10/69, International Monetary Fund.
    5. Yiping Huang & Xun Wang, 2011. "Does Financial Repression Inhibit or Facilitate Economic Growth? A Case Study of Chinese Reform Experience," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 73, pages 833-855, December.
    6. Robert A Buckle & Amy A Cruickshank, 2007. "The Challenge of Structural Change in APEC Economies," Treasury Working Paper Series 07/06, New Zealand Treasury.
    7. Lee, Jong-Wha & Hong, Kiseok, 2012. "Economic growth in Asia: Determinants and prospects," Japan and the World Economy, Elsevier, vol. 24(2), pages 101-113.
    8. Ivan Roberts & Anthony Rush, 2010. "Sources of Chinese Demand for Resource Commodities," RBA Research Discussion Papers rdp2010-08, Reserve Bank of Australia.
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