Abstract
Growth in the aggregate market penetration rate (MPR) of the People's Republic of China (PRC) slowed during the period 2002–2014. Closer examination of the destinations and product levels reveals a simultaneous weakening in various markets. Production and trade costs were found to be the main determinants of these changes, while productivity growth and real exchange rate appreciation had either insignificant or limited effects. Predicting trends until 2016, we expect the MPR in almost all destinations and product markets to increase in the optimistic case. However, in a more realistic case, the MPR will likely plateau or fall in most markets. To stabilize exports, the PRC must actively facilitate structural transition in destinations and products. Meanwhile, macro policies to boost domestic demand are also urgently needed to maintain the country's high economic growth.
Highlights
The People’s Republic of China (PRC) has implemented a highly successful export-led growth over the past decade
The slowdown of the PRC’s export growth could have resulted from either contracting external demand or a declining market share in external markets. This can be seen from the following equation: Export growth = Growth of other countries’ imports
Focusing on the PRC’s 14 major trading partners, we find that the growth rate of the PRC’s aggregate market penetration rate (MPR) had been slowing during 2002–2014
Summary
The People’s Republic of China (PRC) has implemented a highly successful export-led growth over the past decade. The slowdown of the PRC’s export growth could have resulted from either contracting external demand or a declining market share in external markets. This can be seen from the following equation: Export growth = Growth of other countries’ imports. While average demand for the country’s exports sharply fell at the height of the global financial crisis in late 2008 and kept declining until May 2009, aggregate MPR even increased during the period. Our results reveal that if the optimistic scenario occurs where pre-crisis upward yearly trends are maintained, the MPR will increase in all destination markets except Japan, and in four out of six product markets except for petroleum, coal, and gas; and food, live animals, beverages, tobacco, oils, and fats. The said measure of competitiveness will either reach a plateau or fall in most destinations, except ASEAN and the Republic of Korea, and in terms of products, in the market for leather, rubber, metal, and textile manufactures
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