Document Abstract
Published:
2008
The global impact of Chinese growth
How has China’s growth affected welfare?
In the wake of China’s opening up to the global economy, this paper discusses the effects of China’s developments in this respect on the welfare of both China and the rest of the world (ROW). It uses a standard two-country neoclassical model to quantitatively assess the global effects of the shocks to China.
It is explained that key facts of the Chinese economy are threefold. First, soon after reform and opening-up, policy was enacted in 1978, the trade volume to GDP ratio increased roughly from 0:1 to 0:4. Second, the annual growth rate of per capita GDP was around 2.5% until 1978 then jumped to roughly 8% on average over the 1978-2004 period. Finally, trade was roughly in balance throughout the pre-1978 period.
The paper finds that the opening-up per se is welfare improving for China but has had little impact on the ROW given a balanced trade constraint. The opening-up of China is beneficial to the ROW if it leads to significant productivity growth in China. Also, China’s balanced trade policy after the opening-up has helped the ROW more than China.
It is explained that key facts of the Chinese economy are threefold. First, soon after reform and opening-up, policy was enacted in 1978, the trade volume to GDP ratio increased roughly from 0:1 to 0:4. Second, the annual growth rate of per capita GDP was around 2.5% until 1978 then jumped to roughly 8% on average over the 1978-2004 period. Finally, trade was roughly in balance throughout the pre-1978 period.
The paper finds that the opening-up per se is welfare improving for China but has had little impact on the ROW given a balanced trade constraint. The opening-up of China is beneficial to the ROW if it leads to significant productivity growth in China. Also, China’s balanced trade policy after the opening-up has helped the ROW more than China.
