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Whither China? Reform and Economic Integration among Chinese Regions

  • Jan Fidrmuc
  • Jarko Fidrmuc
  • Shuo Huang

This paper investigates the changing nature of economic integration in China. Specifically, we consider business-cycle synchronization (correlation of demand and supply shocks) among Chinese provinces during the period 1955-2007. We find that the symmetry of supply shocks has declined after the liberalization initiated in 1978. In contrast, the correlation of demand shocks has increased during the same period. We then seek to explain these correlations by relating them to factors that proxy for interprovincial trade and vulnerability of regions to idiosyncratic shocks. Interprovincial trade and similarity in factor endowments tend to make shocks more symmetric. Surprisingly, foreign trade and inward FDI have little effect on the symmetry of shocks.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4220.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ces:ceswps:_4220
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  10. Fidrmuc, Jarko & Korhonen, Iikka, 2001. "Similarity of supply and demand shocks between the Euro area and the CEECs," BOFIT Discussion Papers 14/2001, Bank of Finland, Institute for Economies in Transition.
  11. Elena Jarocinska, 2008. "Are Intergovernmental Grants Tactical? The Evidence from Russia," CASE Network Studies and Analyses 0361, CASE-Center for Social and Economic Research.
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