China's demand shock in world commodity markets: do resource windfalls lead to economic growth?

This study investigates how China's resource demand shock influenced economic growth in developing countries, addressing a gap in the literature on the growth effects of the 2000s commodity boom. While existing studies document China's global trade impact, the consequences of its resource-driven demand surge remain underexplored. Using data from 100 developing countries between 2001 and 2013, we apply a shift-share instrumental variable approach that leverages China's exogenous demand as a source of variation in multilateral resource exports. We find that resource windfalls during this period reduced economic growth by an average of 40 %. Two key transmission mechanisms are identified: exchange rate appreciation and a decline in foreign direct investment. These findings offer new insights into the costs of resource dependence amid global commodity cycles, expand the literature on China's economic rise, and highlight the structural vulnerabilities faced by resource-exporting developing economies.