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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 Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 13-01.

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Length: 39 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:edb:cedidp:13-01
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