Working Paper: NBER ID: w10768
Authors: Barry Eichengreen; Yeongseop Rhee; Hui Tong
Abstract: We analyze the impact of China's growth on the exports of other Asian countries. Our innovation is to distinguish the increase in China's demand for imports from its increased penetration of export markets. Using the gravity model, we disaggregate among commodity types and account for the endogeneity of Chinese exports. We confirm the tendency for China's exports to crowd out the exports of other Asian countries. But this effect is felt mainly in markets for consumer goods and hence by less-developed Asian countries, not in markets for capital goods or by the more advanced Asian economies for which machinery and equipment are a significant fraction of exports. At the same time, there has been a strong tendency for a rapidly growing China to suck in imports from its Asian neighbors. But this effect is mainly felt in markets for capital goods, where China's income elasticity of import demand is highest, and thus by the more advanced Asian economies. Hence, more and less developed Asian countries are being affected very differently by China's rise.
Keywords: China; Exports; Asian Economies; Gravity Model; Trade Dynamics
JEL Codes: E5; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| China's growth (O44) | regional trade dynamics (F14) |
| Chinese exports (F14) | crowding out of exports from other Asian countries (F69) |
| Exports from Asian countries to China (F14) | increase in capital goods exports (E22) |
| Chinese exports (F14) | negative impact for low-income countries reliant on consumer goods exports (F61) |
| Chinese exports (F14) | positive impact for high-income countries exporting capital goods (F69) |
| Chinese exports (F14) | exports of other Asian countries (F14) |