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The Awakening Chinese Economy: Macro and Terms of Trade Impacts on 10 Major Asia-Pacific Countries

  • Mai, Yin Hua

    ()

    (Centre of Policy Studies and IMPACT Project)

  • Adams, Philip

    ()

    (Centre of Policy Studies and IMPACT Project)

  • Dixon, Peter

    ()

    (Centre of Policy Studies and IMPACT Project)

  • Menon, Jayant

    ()

    (Asian Development Bank)

This paper analyzes the impact that terms of trade (TOT) are likely to have on the growth of the People’s Republic of China’s (PRC) neighboring countries. Two scenarios employing a dynamic computable general equilibrium framework are considered: (i) a convergence scenario, where historical trends are projected; and (ii) a baseline scenario, where technological progress in the PRC is placed in line with that of the United States (US). The results show that the PRC’s technological convergence leads to increased world prices for mining products, and lower world prices for manufactures, especially those exported extensively by the PRC. On the whole, however, the effects on the growth and TOT of the PRC’s neighboring countries are relatively small. The modelling framework used in this study explicitly captures the various offsetting effects that dampen the impact on TOT and contribute to the small impact on growth. In addition, the additional capital required to finance the PRC’s growth comes predominantly from domestic savings, placing little pressure on the global supply of capital. Thus, an awakening PRC is unlikely to make a dramatic entrance despite the country’s overall positive impact on the region – although there is nothing to fear, there is also only little to gain.

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File URL: http://aric.adb.org/pdf/workingpaper/WP66_Mai_The_Awakening_Chinese_Economy.pdf
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Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 66.

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Length: 56 pages
Date of creation: 01 Nov 2010
Date of revision:
Handle: RePEc:ris:adbrei:0066
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  1. Dixon, Peter B & Menon, Jayant & Rimmer, Maureen T, 2000. "Changes in Technology and Preferences: A General Equilibrium Explanation of Rapid Growth in Trade," Australian Economic Papers, Wiley Blackwell, vol. 39(1), pages 33-55, March.
  2. Menon, Jayant, 1998. "Total factor productivity growth in foreign and domestic firms in Malaysian manufacturing," Journal of Asian Economics, Elsevier, vol. 9(2), pages 251-280.
  3. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2007. "China and the Exports of Other Asian Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 143(2), pages 201-226, July.
  4. Ippei Fujiwara & Keisuke Otsu & Masashi Saito, 2011. "The Global Impact of Chinese Growth," Studies in Economics 1115, School of Economics, University of Kent.
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