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How dependent is the Chinese economy on exports and in what sense has its growth been export-led?

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  • He, Dong
  • Zhang, Wenlang

Abstract

This paper studies the interaction between foreign trade and domestic demand and supply in China's economic transformation. It compares China's export dependency with other economies using input-output analysis. The paper also conducts econometric analysis of provincial level data to examine causality between the growth of foreign trade and components of domestic demand, and causality between the growth of foreign trade and total factor productivity. The main message is that China's export dependency is significantly lower than implied by the headline exports-to-GDP ratio. Moreover, the contribution of export to economic growth in China came mainly from its impact on total factor productivity growth from a supply perspective rather than its multiplier effect from a demand perspective. This relationship was found to be stronger in the more developed coastal areas than in the less developed inland areas.

Suggested Citation

  • He, Dong & Zhang, Wenlang, 2010. "How dependent is the Chinese economy on exports and in what sense has its growth been export-led?," Journal of Asian Economics, Elsevier, vol. 21(1), pages 87-104, February.
    • Handle: RePEc:eee:asieco:v:21:y:2010:i:1:p:87-104
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    References listed on IDEAS

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    1. Panagariya, Arvind, 1991. "Unraveling the mysteries of China's foreign trade regime : a view from Jiangsu Province," Policy Research Working Paper Series 801, The World Bank.
    2. Kent Matthews & Xu Zhang & Jianguang Guo, 2009. "Nonperforming Loans and Productivity in Chinese Banks, 1997-2006," Chinese Economy, Taylor & Francis Journals, vol. 42(2), pages 30-47, March.
    3. Kui-Wai Li, 2003. "China's Capital and Productivity Measurement Using Financial Resources," Working Papers 851, Economic Growth Center, Yale University.
    4. Dong He & Wenlang Zhang & Jimmy Shek, 2007. "How Efficient Has Been China'S Investment? Empirical Evidence From National And Provincial Data," Pacific Economic Review, Wiley Blackwell, vol. 12(5), pages 597-617, December.
    5. Dong He & Lillian Cheung & Jian Chang, 2007. "Sense and Nonsense on Asia's Export Dependency and The Decoupling Thesis," Working Papers 0703, Hong Kong Monetary Authority.
    6. Francisco Alcalá & Antonio Ciccone, 2004. "Trade and Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 613-646.
    7. Steven A Barnett & Ray Brooks, 2006. "What’s Driving Investment in China?," IMF Working Papers 06/265, International Monetary Fund.
    8. Xiaolan Fu, 2004. "Exports, Technical Progress and Productivity Growth in Chinese Manufacturing Industries," Working Papers wp278, Centre for Business Research, University of Cambridge.
    9. Robert C. Feenstra & Chang Hong, 2010. "China's Exports and Employment," NBER Chapters,in: China's Growing Role in World Trade, pages 167-199 National Bureau of Economic Research, Inc.
    10. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
    11. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
    12. repec:dau:papers:123456789/6159 is not listed on IDEAS
    13. Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April.
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    More about this item

    Keywords

    Export-led growth Export dependency Input-output analysis Malmquist index;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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