Working Paper: CEPR ID: DP13721
Authors: Robert Koopman; Eddy Bekkers; Carolina Lemos Rego
Abstract: This paper examines the impact of structural change in China, in particular a reduction in the savings rate, an increase in the share of skilled workers, and an increase in productivity in technologically advanced manufacturing sectors targeted by Made in China 2025. Baseline projections until 2040 are generated with the WTO Global Trade Model, a dynamic computable general equilibrium model. With the modelled structural changes the Chinese economy is projected to reorient its focus increasingly onto the domestic economy, raising the share of private household and government consumption in GDP, turning China's trade surplus into a trade deficit, reducing China's share in global exports, raising the share of services in both production and exports, shifting the destination markets of Chinese exports from developed to developing countries, and changing its pattern of comparative advantage away from sectors like light and heavy manufacturing to electronic and machinery equipment. The large bilateral trade surplus vis-a-vis the United States is projected to fall to almost zero.
Keywords: Dynamic CGE Modelling; Structural Change; China
JEL Codes: F14; F43; I25
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Falling Savings Rate (E21) | Increased Consumption (E21) |
| Falling Savings Rate (E21) | Trade Deficit (F14) |
| Rising Share of Skilled Workers (J69) | Increased Productivity in High-End Manufacturing (L63) |
| Rising Share of Skilled Workers (J69) | Shift in Comparative Advantage (F11) |
| Higher Productivity Growth (O49) | Changes in Export Patterns (F14) |
| Higher Productivity Growth (O49) | Enhanced Competitive Edge in Electronics and Machinery (L63) |
| Increased Consumption (E21) | Trade Deficit (F14) |