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Wednesday, December 29, 2010

China’s influence on the World economy

IMF’s Vivek Arora and Athanasios Vamvakidis articulately quantified (read the link, please) the implications of China’s growth for the rest of the world, albeit from the aggregate level. Some of the interesting findings are as follows:

  • China’s Real GDP has grown by about 10.0% annually, implying a doubling every seven to eight years. The resulting 16-fold increase in a major economy’s national income during a single generation is unprecedented;
  • China’s share in world trade has increased ten-fold over the past three decades, to about 9.0%, while its share in world GDP has risen to 13.0% from less than 3.0% (PPP basis);
  • Inflows of FDI to China, for example, accounted for 7% of gross world FDI inflows in 2009, compared with just 1.0% in 1980.
  • In short and medium term, the results suggest that a 1 percentage point shock to China’s GDP growth is followed by a cumulative response in other countries’ growth of 0.2 percentage point after three years and 0.4 percentage point after five years.  

3 comments:

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  2. Has there been any similar analysis of BRIC countries? The analysis in this article looks at the aggregate impacts in the economy. Is there an analysis of the nature of growth from a real business cycle perspective? What is the role of institutional development in the economic growth process of China?

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  3. In this article, the analysis was entirely based on China's growth impact on the rest of the world. No indication of real business cycle analysis was found in the article.

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