Australia's Linkages with China: Prospects and Ramifications of China's Economic Transition

Philippe Karam and Dirk Muir

No 2018/119, IMF Working Papers from International Monetary Fund

Abstract: China and Australia have increasingly strong links, especially through trade. These are driven by demand from China for Australian commodities (coal and iron ore) and services (tourism and education). These links are influenced by China’s transition to a services-driven, consumer-led economy. Using ANZIMF, the Australia-New Zealand Integrated Monetary and Fiscal model, three risks (both upside and downside) to China during this transition process are considered, focusing on their spillovers to Australia. One simple takeaway is central to each risk – while the real GDP response to shocks in Australia typically is small, responses in demand components or sectors are usually much larger– along with three further takeaways, all of which help in the analysis of Australia in relation to any risk emanating from China.

Keywords: WP; China; Australia; commodity; export; price; Dynamic stochastic general equilibrium; open economy macoeconomics; small open economy; open economy simulation; commodity exporter; downside scenario; exports fall; Australia-New Zealand; transition path; Australia-China linkage; household sector; China-Australia relationship; export-led growth; Consumption; Exports; Service exports; Commodity prices; Global; Asia and Pacific (search for similar items in EconPapers)
Pages: 26
Date: 2018-05-22
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