The economic nexus between China and emerging economies

Abstract

ABSTRACTChina is currently the largest trading nation in the world, which implies that trade relationship with China may have great significance for many countries around the world. This study examines the influence of trade relations with China on GDP and manufacturing growth rates of other countries. The paper first examines the impact of the fluctuations in exports to China from other countries on the latter’s GDP growth rate. The analysis reveals that, in 48 countries and regions where exports to China exceed 9% of their total exports, the growth of exports to China has a positive and significant impact on their GDP growth rates. The latter half of the paper examines the impact of imports of manufactured goods from China on the manufacturing industries of importing countries. The analysis of manufacturing growth rates of 153 countries and regions reveals that an increase of imports of manufactured goods from China leads to a decline of manufacturing growth in the next year. With growing demand for primary goods in China as well as increase of manufactured goods exports from China, many countries show a trend toward concentration on primary goods exports in their trade relationship with China. This may be beneficial for them in the short run, but in the long run there is a concern that they may suffer from “the curse of natural resources.” In the final part of the paper, some initiatives taken by China to reverse this trend in Africa are reviewed.