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The Impact of China's Import Demand Growth on Sectoral Specialization in Brazil: A CGE Assessment

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  • Willenbockel, Dirk

Abstract

Brazil’s trade with China has expanded at a tremendous pace over the past few years. Between 1999 and 2004, its exports to China have grown by 800 percent in value terms while the value of its imports from China has more than tripled. China is now Brazil’s third most important export destination and its fourth most important import source. While the Brazilian government actively pursues closer trade and investment links with China, critics fear that potential resulting shifts in specialization patterns towards low-value-added activities with low human capital and technology intensity may adversely affect Brazil’s long-run growth prospects, given that Brazilian exports to China consist primarily of primary commodities, while imports from China increasingly compete with domestic manufacturing output in home and third-country markets. To which extent are fears that China’s emergence as a global player in international trade pushes Brazil back into raw material corner warranted? This paper aims to provide a partial answer to this question by focusing on the impact of China’s growth in demand for Brazilian exports from 2001 to 2006 on the sectoral structure of the Brazilian economy. The analytical framework is a 34-sector computable general equilibrium model. The model is calibrated to a 2001 dataset and shocked with the growth in Brazilian exports to China by sector over the period 2001 to 2006. The simulation results provide an indication of the strength of the resource pull effects due to this shock in isolation from all other exogenous influences on the Brazilian economy.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 6200.

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Date of creation: Nov 2007
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Handle: RePEc:pra:mprapa:6200

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Keywords: Brazil; Applied general equilibrium analysis; China; Dutch disease; Computable general equilibrium analysis;

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  1. Raa, M.H. ten & Kop Jansen, P., 1990. "The choice of model in the construction of input-output coefficients matrices," Open Access publications from Tilburg University urn:nbn:nl:ui:12-381948, Tilburg University.
  2. Jansen, Pieter Kop & ten Raa, Thijs, 1990. "The Choice of Model in the Construction of Input-Output Coefficients Matrices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 213-27, February.
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