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Impact of the Global Financial Crisis on China: Empirical Evidence and Policy Implications


  • Ligang Liu


This paper applies a structural vector autoregression analysis to quantify the impact of the global financial crisis on China. It is found that the impact is indeed sizeable: a 1-percent decline in economic growth in the USA, the EU and Japan is likely to lead to a 0.73-percent decline in growth in China. The article discusses whether the current measures of fiscal stimulus are adequate to offset the sharp decline in external demand. Although there is little doubt that the massive fiscal stimulus will largely offset the significant shortfalls in external demand, the current growth pattern in China will be increasingly unsustainable in the long term. China's reform cycles suggest that external shocks are often opportunities for structural reforms. Therefore, the crisis could also be a catalyst for rebalancing China's economic structure so as to return the economy to a sustainable path. Copyright (c) 2009 The Author Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

Suggested Citation

  • Ligang Liu, 2009. "Impact of the Global Financial Crisis on China: Empirical Evidence and Policy Implications," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(6), pages 1-23.
  • Handle: RePEc:bla:chinae:v:17:y:2009:i:6:p:1-23

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    References listed on IDEAS

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    Cited by:

    1. Diao, Xinshen & Zhang, Yumei & Chen, Kevin Z., 2012. "The global recession and China's stimulus package: A general equilibrium assessment of country level impacts," China Economic Review, Elsevier, vol. 23(1), pages 1-17.
    2. Narendar Rao & K. Reddy, 2015. "The impact of the global financial crisis on cross-border mergers and acquisitions: a continental and industry analysis," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 309-341, December.
    3. Yingxin Shi & Mototsugu Fukushige, 2015. "Long-Run Fiscal Multipliers for Autonomous Prefectures in China," Pacific Economic Review, Wiley Blackwell, vol. 20(5), pages 687-695, December.
    4. Ghamz-e-Ali Siyal & Asma Mohsin & Khalid Zaman, 2014. "Financial Soundness and Pakistan’s Economics Growth: Turn on the Light," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(9), pages 359-371, September.
    5. Roberto Casarin & Komla Mawulom Agudze & Monica Billio & Eric Girardin, 2014. "Growth-cycle phases in China�s provinces: A panel Markov-switching approach," Working Papers 2014:19, Department of Economics, University of Venice "Ca' Foscari".
    6. Françoise Lemoine, 2010. "Past Successes and New Challenges: China's Foreign Trade at a Turning Point," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 18(3), pages 1-23.
    7. Nadia Garbellini & Enrico Marelli & Ariel Luis Wirkierman, 2014. "Domestic demand and global production in the Eurozone: A multi-regional input-output assessment of the global crisis," International Review of Applied Economics, Taylor & Francis Journals, vol. 28(3), pages 336-364, May.
    8. repec:taf:applec:v:49:y:2017:i:40:p:3995-4012 is not listed on IDEAS
    9. Giorgio Canarella & Stephen M. Miller, 2017. "The Determinants of Growth in the Information and Communication Technology (ICT) Industry: A Firm-Level Analysis," Working papers 2017-12, University of Connecticut, Department of Economics.
    10. Matthews, Kent & Zhang, Nina (Xu), 2010. "Bank productivity in China 1997-2007: Measurement and convergence," China Economic Review, Elsevier, vol. 21(4), pages 617-628, December.
    11. Zhang, Youguo & Tang, Zhipeng, 2015. "Driving factors of carbon embodied in China's provincial exports," Energy Economics, Elsevier, vol. 51(C), pages 445-454.
    12. Reddy, Kotapati Srinivasa, 2015. "The impact of the global financial crisis on border-crossing mergers and acquisitions: A continental/industry analysis," MPRA Paper 63563, University Library of Munich, Germany, revised 2015.

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