Sources of Chinese Demand for Resource Commodities
Is Chinaâ€™s demand for resources driven predominantly by domestic factors or by global demand for its exports? The answer to this question is important for many resource-exporting countries, such as Australia, Brazil, Canada and India. This paper provides evidence that Chinaâ€™s (mainly manufacturing) exports have been a significant driver of its demand for resource commodities over recent decades. First, it employs input-output tables to demonstrate that, historically, manufacturing has been at least as important as construction as a driver of Chinaâ€™s demand for resource-intensive metal products. Second, it shows that global trade in non-oil resource commodities can be described by the gravity model of trade. Using this model it is found that, controlling for domestic expenditure (including investment), exports are a sizeable and significant determinant of a countryâ€™s resource imports, and that this has been true for China as well as for other countries.
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