IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Combating China’s Export Contraction: Fiscal Expansion or Accelerated Industrial Reform?

  • Rod Tyers

    (UWA Business School, The University of Western Australia)

  • Ling Huang

    (School of Economics, Peking University)

Initially, the global financial crisis caused a surge of financial inflows to China, raising investment, but this abated in 2008, leaving a substantial contraction in export demand. The government’s key response was to commit to an unprecedented fiscal expansion. Two oftignored consequences are, first that government spending is on non-traded goods and services and so enlarges the consequent real appreciation and, second, that a more inward-looking economy causes firms to face less elastic demand and hence to increase oligopoly rents, further enlarging the real appreciation. Both are important for China because of the contribution of its real-exchange-rate sensitive, low-margin labour-intensive export sector to total employment. An economy-wide analysis is offered, using a model that takes explicit account of oligopoly behaviour. The results suggest that a conventional fiscal expansion would further contract the Chinese economy. On the other hand, notwithstanding the export contraction further industrial reform, emphasising the largely state-owned sectors, would reduce costs and foster growth in both output and modern sector employment.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.business.uwa.edu.au/__data/assets/pdf_file/0020/402329/09_15_Tyers.pdf
Download Restriction: no

Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 09-15.

as
in new window

Length: 35 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:uwa:wpaper:09-15
Contact details of provider: Postal: 35 Stirling Highway, Crawley, W.A. 6009
Phone: (08) 9380 2918
Fax: (08) 9380 1016
Web page: http://www.business.uwa.edu.au/school/disciplines/economics
More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Edward J. Balistreri & Russell H. Hillberry & Thomas F. Rutherford, 2008. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," CER-ETH Economics working paper series 08/89, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  2. Rod Tyers & Feng Lu, 2009. "Competition Policy, Corporate Saving and China's Current Account Surplus," ANU Working Papers in Economics and Econometrics 2009-496, Australian National University, College of Business and Economics, School of Economics.
  3. Rod Tyers, 2005. "Trade Reform and Manufacturing Pricing Behavior in Four Archetype Asia-Pacific Economies ," Asian Economic Journal, East Asian Economic Association, vol. 19(2), pages 181-203, 06.
  4. Barro, Robert J., 1981. "Output Effects of Government Purchases," Scholarly Articles 3451294, Harvard University Department of Economics.
  5. Holger C. Wolf & Alberto Giovannini & Jose De Gregorio, 1994. "International Evidenceon Tradables and Nontradables Inflation," IMF Working Papers 94/33, International Monetary Fund.
  6. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-32, December.
  7. Rod Tyers & Ying Zhang, 2010. "Appreciating The Renminbi," Economics Discussion / Working Papers 10-13, The University of Western Australia, Department of Economics.
  8. Corden, W. Max, 1994. "Economic Policy, Exchange Rates, and the International System," OUP Catalogue, Oxford University Press, number 9780198774099, March.
  9. Rod Tyers & Jane Golley & Bu Yongxiang & Iain Bain, 2007. "China's Economic Growth and its Real Exchange Rate," DEGIT Conference Papers c012_014, DEGIT, Dynamics, Economic Growth, and International Trade.
  10. Don, H. & Gunasekera, B. H. & Tyers, Rod, 1990. "Imperfect competition and returns to scale in a newly industrialising economy : A general equilibrium analysis of Korean trade policy," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 223-247, November.
  11. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  12. Vahagn Galstyan and Philip R. Lane, 2008. "The Composition of Government Spending and the Real Exchange Rate," The Institute for International Integration Studies Discussion Paper Series iiisdp257, IIIS.
  13. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-47, June.
  14. Jahangir Aziz & Li Cui, 2007. "Explaining China's Low Consumption; The Neglected Role of Household Income," IMF Working Papers 07/181, International Monetary Fund.
  15. Bradley, Ian & Price, Catherine, 1988. "The Economic Regulation of Private Industries by Price Constraints," Journal of Industrial Economics, Wiley Blackwell, vol. 37(1), pages 99-106, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:uwa:wpaper:09-15. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shane Standley)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.